Proposal for a Council Regulation amending Regulation (EC) No 1480/2003 imposing a definitive countervailing duty and collecting definitely the provisional duty imposed on imports of certain electronic microcircuits known as DRAMs (Dynamic Random Access Memories) originating in the Republic of Korea
Date: 2006-03-08
Institutions: European Commission
Subjects: South Korea, countervailing charge, electronic component, import, originating product

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.3.2006 
COM(2006) 107 final 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1480/2003 imposing a definitive countervailing duty and 
collecting definitely the provisional duty imposed on imports of certain electronic 
microcircuits known as DRAMs (Dynamic Random Access Memories) originating in the 
Republic of Korea 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

This  proposal  concerns  the  application  of  Council  Regulation  (EC)  No  1515/2001  of 
23 July 2001 on the measures that may be taken by the Community following a report 
adopted by the WTO Dispute Settlement Body (‘DSB’) concerning anti-dumping and 
anti-subsidy measures and Council Regulation (EC) No 2026/97 of 6 October 1997 on 
protection  against  subsidised  imports  from  countries  not  members  of  the  European 
Community,  as  last  amended  by  Council  Regulation  (EC)  No 461/2004  of  8  March 
2004  (‘basic  Regulation’)  in  the  proceeding  concerning  imports  of  certain  electronic 
integrated  circuits  known  as  Dynamic  Random  Access  Memories  (‘DRAMs’) 
originating in the Republic of Korea.  

•  General context 

This  proposal  is  made  in  the  context  of  the  implementation  of  the  above-mentioned 
Regulations  following  the  recommendations  of  the  DSB  of  the  WTO  on  the  case 
‘European  Communities  –  Countervailing  Measures  on  Dynamic  Random  Access 
Memory Chips from Korea’ and is the result of a reassessment of the findings of the 
investigation that resulted in the adoption of the disputed measures, which was carried 
out  in  line  with  the  substantive  and  procedural  requirements  laid  out  in  the  basic 
Regulation.  This  proposal  should  be  adopted  by  the  Council  and  the  Regulation 
published  in  the  Official  Journal  by  3  April  2006,  the  deadline  agreed  with  the 
Republic of Korea to implement the above-mentioned DSB recommendations. 

•  Existing provisions in the area of the proposal 

There are no existing provisions in the area of the proposal. 

•  Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Interested  parties  concerned  by  the  proceeding  have  already  had  the  possibility  to 
defend their interests, in line with the provisions of the basic Regulation. 

•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

This  proposal  is  the  result  of  the  implementation  of  Council  Regulation  (EC)  No 

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1515/2001 as well as the basic Regulation. 

These  Regulations  do  not  foresee  a  general  impact  assessment  but  contain  an 
exhaustive list of conditions that have to be assessed. 

3)  LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

On 3 August 2005, the DSB of the WTO adopted a Panel report on the case ‘European 
Communities – Countervailing Measures on Dynamic Random Access Memory Chips 
from  Korea’.  In  the  light  of  the  recommendations  set  out  in  the  Panel  report,  the 
Commission reassessed the findings of the investigation that resulted in the adoption of 
the disputed measures (‘original investigation’). 

The reassessment of the findings led to a partial revision of the amounts of the different 
subsidies  established  in  the  original  investigation  and  consequently  the  level  of  the 
countervailing duty. Furthermore, the impact of one injury factor “wages”, for which 
evidence of consideration in the original investigation was missing, was re-evaluated. 
The  impact  of  factors  other  than  the  subsidised imports on the injury suffered by the 
Community industry was also evaluated further. 

The  Member  States  were  consulted  regarding  this  reassessment  of  findings.  25 
Member  States  supported  and  no  Member  State  opposed  the  proposal.  No  Member 
State abstained. 

It is therefore proposed that the Council adopts the attached proposal for a Regulation 
which  should  be  published  in  the  Official  Journal  of  the  European  Union  as  soon  as 
possible.  

•  Legal basis 

Council Regulation (EC) No 1515/2001 of 23 July 2001 on the measures that may be 
taken by the Community following a report adopted by the WTO DSB concerning anti-
dumping  and  anti-subsidy  measures  and  Council  Regulation  (EC)  No  2026/97  of  6 
October 1997 on protection against subsidised imports from countries not members of 
the European Community, as last amended by Council Regulation (EC) No 461/2004 
of 8 March 2004. 

•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reasons. 

The  form  of  action  is  described  in  the  above-mentioned  Regulations  and  leaves  no 
scope for national decision. 

Indication  of  how  financial  and  administrative  burden  falling  upon  the  Community, 

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national governments, regional and local authorities, economic operators and citizens is 
minimized and proportionate to the objective of the proposal is not applicable. 

•  Choice of instruments 

Proposed instruments: regulation. 

Other means would not be adequate because Council Regulation (EC) No 1515/2001 
and the basic Regulation do not foresee alternative options. 

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 1480/2003 imposing a definitive countervailing duty and 
collecting definitely the provisional duty imposed on imports of certain electronic 
microcircuits known as DRAMs (Dynamic Random Access Memories) originating in the 
Republic of Korea 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Regulation  (EC)  No  1515/2001  of  23  July  2001  on  the  measures 
that  may  be  taken  by  the  Community  following  a  report  adopted  by  the  WTO  Dispute 
Settlement Body concerning anti-dumping and anti-subsidy measures1, 

Having  regard  to  Council  Regulation  (EC)  No  2026/97  of  6  October  1997  on  protection 
against subsidised imports from countries not members of the European Community2 (‘basic 
Regulation’), 

Having  regard  to  the  proposal  submitted  by  the  Commission  after  consulting  the  Advisory 
Committee, 

Whereas: 

1. 

Existing measures 

A. 

PROCEDURE 

(1) 

By  Regulation (EC) No 1480/20033 (‘definitive Regulation’), the Council imposed a 
definitive countervailing duty of 34,8% on imports of certain electronic microcircuits 
known as Dynamic Random Access Memories (‘DRAMs’) originating in the Republic 
of Korea and manufactured by all companies other than Samsung Electronics Co., Ltd 
(‘Samsung’), for which a 0% duty rate was established. The definitive Regulation was 
preceded  by  Commission  Regulation  (EC)  No  708/2003  imposing  a  provisional 
countervailing  duty  on  imports  of  DRAMs  originating  in  the  Republic  of  Korea4 
(‘provisional Regulation’). 

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4 

OJ L 201, 26.7.2001, p. 10. 
OJ  L  288,  21.10.1997,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  461/2004  (OJ  L  77, 
13.3.2004, p. 12). 
OJ  L  212,  22.8.2003,  p.  1.  Regulation  as  amended  by  Regulation  (EC)  No  2116/2005  (OJ  L  340, 
23.12.2005, p.7). 
OJ L 102, 24.4.2003, p. 7. 

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(2) 

Two  exporting  producers  located  in  the  Republic  of  Korea  co-operated  in  the 
investigation  which  led  to  the  imposition  of  the  existing  measures  (‘original 
investigation’):  Samsung,  which  was  not  found  receiving  subsidies,  and  Hynix 
Semiconductor Inc. (‘Hynix’). The European Community (EC) industry in the original 
investigation consisted of two producers which accounted for the major proportion of 
the  total  Community  production  of  DRAMs,  Infineon  Technologies  AG,  Munich, 
Germany,  (‘Infineon’)  and  Micron  Europe  Ltd,  Crowthorne,  United  Kingdom 
(‘Micron’). 

(3) 

The investigation of subsidisation and injury covered the period from 1 January 2001 
to 31 December 2001 (‘IP’). The examination of trends relevant for the assessment of 
injury  covered  the  period  from  1  January  1998  to  the  end  of  the  IP  (‘period  under 
consideration’). 

2. 

Report adopted by the Dispute Settlement Body of the WTO 

(4) 

(5) 

On  3  August  2005,  the  Dispute  Settlement  Body  (‘DSB’)  of  the  World  Trading 
Organisation  (‘WTO’)  adopted  a  Panel  report  in  ‘European  Communities  – 
Countervailing Measures on Dynamic Random Access Memory Chips from Korea’5. 

According  to  the  Panel  report,  the  EC  acted  in  a  manner  inconsistent  with  its  WTO 
obligations under: 

(a) 

(b) 

(c) 

(d) 

(e) 

Article  1.1(a)  of  the  SCM  Agreement  in  determining  that  the  May 
2001 Restructuring Programme constituted a financial contribution by 
the government; 

Article  1.1(b)  of  the  SCM  Agreement  in  its  determination  of  the 
existence of a benefit in the case of the Syndicated Loan; 

Articles 1.1(b) and 14 of the SCM Agreement in directly applying, for 
the  purposes  of  the  calculation  of  the  amount  of  benefit,  its  grant 
methodology to all programmed found to constitute a subsidy; 

Article  15.4  of  the  SCM  Agreement  by  not  evaluating  the  factor 
“wages”  as  a  relevant  factor  affecting  the  state  of  the  domestic 
industry; and 

Article  15.5  of  the  SCM  Agreement  by  failing  to  make  sure  the  that 
injury  caused  by  certain  other  factors  (in  particular,  decline  in 
demand,  overcapacity,  and  other  (non-subsidised)  imports)  was  not 
attributed to the subsidised imports. 

(6) 

On  the  other  hand,  the  EC  was  found  to  have  acted  consistently  with  its  WTO 
obligations under: 

(a) 

Article  1.1(a)  of  the  SCM  Agreement  in  determining  that  the 
Syndicated  Loan, 
the  KDB  Debenture 
the  October  2001  Restructuring  Programme 
Programme  and 

the  KEIC  Guarantee, 

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WT/DS299/R 

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constituted  a  financial  contribution  by  the  Government  of  Korea 
(‘GOK’); 

Article  1.1(b)  of  the  SCM  Agreement  in  determining  that  a  benefit 
was conferred on Hynix by the KEIC Guarantee, the KDB Debenture 
Programme, the May 2001 Restructuring Programme and the October 
2001 Restructuring Programme; 

Articles  1.2  and  2  of  the  SCM  Agreement  in  finding  de  facto 
specificity (2 Korean claims);  

Article  15.2  of  the  SCM  Agreement  in  assessing  the  significance  of 
the  volume  and  price  effects  of  the  subsidised  imports  (2  Korean 
claims); 

Article 15.4 of the SCM Agreement in considering all factors relevant 
to the overall condition of the domestic industry, except for the factor 
“wages”; 

Article  15.5  of  the  SCM  Agreement  in  demonstrating  the  requisite 
causal link between the subsidised imports and injury; and 

Article 12.7 of the SCM Agreement in applying “facts available” with 
respect to the subsidy investigation. 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

3. 

Reassessment to implement the DSB’s recommendations 

(7) 

In  the  light  of  the  recommendations  set  out  in  the  Panel  report,  the  Commission 
conducted  a  thorough  and  objective  reassessment  of  the  relevant  findings  in  the 
definitive  Regulation  on  the  basis  of  information  on  the  record.  The  scope  of  the 
reassessment is appropriately limited to an examination of the five specific aspects of 
the existing measure, as described above, that were found to be inconsistent with the 
SCM  Agreement.  This  examination  is  based  on  the  re-evaluation  of  the  existing 
evidence on the record of the original investigation in light of the relevant findings in 
the Panel report. 

(8) 

The reassessment set out below shows that injurious subsidisation still exists, although 
at a slightly lower level. 

B. 

PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT  

(9) 

The product under consideration and the like product are the same as that covered by 
the  original  investigation,  i.e.  certain  electronic  microcircuits  known  as  Dynamic 
Random Access Memories ('DRAMs'), of all types, densities and variations, whether 
assembled, in processed wafer or chips (dies), manufactured using variations of Metal 
Oxide-Semiconductors  ('MOS')  process  technology,  including  complementary  MOS 
types  (CMOS),  of  all  densities  (including  future  densities),  irrespective  of  access 
speed, configuration, package or frame etc., originating in the Republic of Korea. The 
product  concerned  also  includes  DRAMs  presented  in  (non-customized)  memory 

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modules  or  (non-customized)  memory  boards,  or  in  some  other  kind  of  aggregate 
form, provided the main purpose of which is to provide memory6. 

(10)  The product concerned is currently classifiable within CN codes 8542 21 11, 8542 21 
13, 8542 21 15, 8542 21 17, ex 8542 21 01, ex 8542 21 05, ex 8548 90 10, ex 8473 30 
10 and ex 8473 50 10.  

(11)  The  Panel  report  did  not  cover  any  claims  affecting  the  findings  set  out  in  the 
definitive Regulation concerning the product under consideration and the like product. 

C. 

REVISED FINDINGS BASED ON THE PANEL REPORT 

1. 

Subsidies 

1.1.  Introduction 

(12)  This  part  sets  out 

the  reassessed  findings  based  on 

the  conclusions  and 

recommendations of the Panel report concerning: 

(a)  whether  the  May  2001  Restructuring  Programme  constituted  a  financial 
contribution  by  the  GOK  within  the  meaning  of  Article  2(1)  of  Council 
Regulation (EC) No 2026/977 (‘basic Regulation’); 

(b)  whether  there  was  a  benefit  in  the  case  of  the  Syndicated  Loan  within  the 

meaning of Article 2(2) of the basic Regulation; 

(c) 

the  calculation  of  the  amount  of  the  benefit  with  regard  to  all  subsidy 
programmes within the meaning of Articles 2(2) and 6 of the basic Regulation. 

(13)  All  other  findings  concerning  subsidies  remain  as  established  in  the  original 

investigation and set out in the provisional Regulation and the definitive Regulation. 

1.2.  May  2001  Bond  Purchase  by  Creditor  Banks  in  the  amount  of  KRW  1 

trillion and First Roll-over of Debt (Restructuring Programme) 

(14)  The  Panel  found  that  the  determination  that  the  creditor  banks  were  directed  to 
participate in the May 2001 Restructuring Programme and that their purchase of KRW 
1 trillion of convertible bonds (‘CBs’) as part of the Programme therefore constituted a 
financial contribution by the GOK was not consistent with Article 1.1(a) of the SCM 
Agreement8.  More  specifically,  the  Panel  found  that  “while  the  May  2001 
Restructuring  Programme  is  a  close  case,  we  consider  that  the  evidence  before  the 
investigating  authority  was  insufficient  to  reasonably  conclude  that  the  government 
entrusted or directed the private banks to purchase the Hynix CBs.”9 

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Regulation (EC) No 2116/2005 (OJ L 340, 23.12.2005, p. 7) amended the definitive Regulation for the 
purpose of adopting special provisions in order to ensure that the countervailing duty is properly levied 
on the product concerned. 
OJ  L  288,  21.10.1997,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  461/2004  (OJ  L  77, 
13.3.2004, p. 12). 
Panel report, para. 7.110. 
Panel report, para. 7.109. 

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(15) 

In accordance with the Panel’s assessment, the funds provided to Hynix in the context 
of the May 2001 Restructuring Programme shall not be countervailed.10 

1.3.  Syndicated Loan of KRW 800 billion 

(16)  With respect to the Syndicated Loan of KRW 800 billion, the Panel found that the EC 
had properly established that the GOK directed the Korea Exchange Bank (‘KEB’) to 
participate in the loan and that this constituted a financial contribution via entrustment 
or  direction  of  KEB  in  accordance  with  Article  1.1(a)  of  the  SCM  Agreement.  The 
Panel  also  found  that  the  Korea  Development  Bank  (‘KDB’)  provided  a  direct 
financial contribution through its participation in the Syndicated Loan, and because the 
KDB was a public body, the EC was not required to make a finding of entrustment or 
direction.11 However, the Panel found that the EC failed to establish the existence of a 
benefit from the financial contribution provided by the KDB and the KEB within the 
meaning of Article 1(b) of the SCM Agreement12. Specifically, the Panel stated that the 
EC  had  not  examined  whether  there  were  comparable  commercial  loans  that  could 
actually  have  been  obtained  by  Hynix  on  the  market  and  stated  that  the  EC  had 
ignored the other participants in the Syndicated Loans as possible benchmarks.13 

(17) 

In the view of the Commission, the participation by the other banks in the Syndicated 
Loan cannot serve as a proper benchmark for determining the existence of a benefit. 
As  the  Panel  itself  noted,  in  determining  the  existence  of  a  commercial  benchmark, 
authorities  must  examine  whether  such  loans  were  so  influenced  by  the  alleged 
government  intervention  that  they  do  not  represent  loans  that  could  actually  be 
obtained on the market.14 The Commission has conducted a thorough re-examination 
of the extensive record in this case and has employed the type of analysis discussed by 
the Panel. On this basis, the Commission has determined that the loans from the other 
banks participating in the Syndicated Loan could not serve as a proper benchmark. 

(18)  First,  we  consider  the  terrible  financial  condition  of  Hynix  at  the  time  that  the 
Syndicated Loan was arranged. As noted in recital (19) of the definitive Regulation, at 
the  time  the  loan  was  agreed  to,  at  the  end  of  2000,  Hynix  was  in  severe  financial 
distress. It had over USD 9,46 billion in liabilities at the end of 2000, which was over 
twice  its  net  worth  and  over  four  times  the  market  capitalisation  of  the  company.  It 
suffered a loss in 2000, a year in which other large DRAM producers registered profits 
and  which  was  generally  considered  to  have  been  a  very  good  year  in  the  DRAM 
industry. The majority of Hynix liabilities were coming due in 2001 and the company 
was  facing  intense  liquidity  problems.  Many  independent  analysts  and  brokerage 
houses  were  saying  at  that  time  that  the  company  would  not  be  able  to  generate 

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14 

Based  on  the  Panel’s  findings,  the  purchase  of  CBs  by  the  public  bodies  involved  in  the  May  2001 
Restructuring Programme remains a countervailable subsidy. However, no further action is required on 
this  point,  as  any  benefit  has  already  been accounted for  in  the  subsidy  found  to  be  conferred  by  the 
October 2001 Restructuring Programme (See recital (65) et seq). 
Panel report, para. 7.69 
Panel report, para. 7.186 
Panel report, para. 7.184 
Panel  report  para.  7.184  See  also  footnote  171,  where  the  Panel  states  that  the  examination  of  other 
participants is important, but that “we emphasize that we do not wish to imply that it is necessarily the 
end-point of such an analysis, as it will need to be determined whether the behaviour of these market 
players is so distorted by the government’s intervention that they can no longer serve as the benchmark 
against which to measure the alleged government distortion.” 

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sufficient  cash  flow  or  asset  disposals  to  pay  off  its  maturing  liabilities.  Under  such 
circumstances,  profit  maximising  banks  operating  under  normal  commercial 
conditions  would  not  voluntarily  participate  in  loans  with  such  enormous  risk  of 
default.15 

(19)  Second, there is ample evidence on the record that other participants in the Syndicated 
Loan  were  pressured  to  participate  in  the  overall  restructuring  of  Hynix’s  debt.  For 
example,  the  record  contains  evidence  that  one  of  the  participants,  Kookmin  Bank, 
was  required  to  lend  directly  to  “troubled  corporate  borrowers”,  Specifically,  in  a 
statement to the Securities and Exchange Commission of the United States, Kookmin 
stated: 

“The  Korean  government  has  promoted,  and,  as  a  matter  of  policy,  may  continue  to 
promote  lending  to  certain  types  of  borrowers.  It  generally  has  done  this  by 
requesting banks to participate in remedial programs for troubled borrowers {such 
as  Hynix}  and  by  identifying  sectors  of  the  economy  it  wishes  to  promote  and 
making low interest loans available to banks and financial institutions who lend to 
borrowers in these sectors. The government has in this manner promoted low-income 
mortgage lending and lending to technology companies. We expect that all loans made 
pursuant to government policies will be reviewed in accordance with our credit review 
policies. However, government policies may influence us to lend to certain sectors or 
in  a  manner  in  which  we  otherwise  would  not  in  the  absence  of  government 
policy.”16 

It is clear that Kookmin refers to Hynix in mentioning ‘troubled borrowers’, because 
the  bank’s  2001  annual  report  lists  Hynix  as  the  single  largest  financially  troubled 
borrower.17 Further, Kookmin, as a GOK-invested enterprise was subject to audit and 
inspection by the GOK Board of Audit and Inspection and as such was under pressure 
to comply with GOK policy. 

(20)  Other participants in the Syndicated Loan were also under pressure from the GOK to 
assist  Hynix.  In  this  respect,  recital  (55)  of  the  definitive  Regulation  provides 
extensive information regarding the extent to which the GOK put pressure on Korea 
First Bank (‘KFB’) to provide ongoing financing to Hynix. In a high-level Economic 
Ministerial meeting in November 2000 the GOK took steps to “alleviate Hynix’s cash 
crunch” and waived statutory credit limits for KFB, KEB and KDB. The Panel did not 
examine  the  evidence  in  relation  to  KFB,  because  the  Commission  concluded  its 
involvement to be negligible. However, given that the Panel found that the same GOK 
tactics  employed  in  relation  to  KEB  amounted  to  direction  and  that  the  GOK  owns 
49% of KFB, it is reasonable to conclude that the GOK was in a position to and did 
exert  influence  over  KFB  in  relation  to  its  decision  to  participate  in  the  Syndicated 
Loan. KDB is a public body and KEB was found by the Panel to have been directed by 
the GOK. The participation of these banks in the Syndicated Loan is thus not a reliable 
commercial benchmark. Other banks that were part of the Syndicated Loan were also 
subject to similar pressure from the GOK. The GOK put very direct pressure on both 

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Definitive Regulation, recital (19). 
Kookmin Bank Prospectus, Offering of American Depositary Shares (18 June 2002) (attachment 67 to 
Micron Technology Italia’s 14 May 2003 submission on the provisional Regulation) (emphasis added). 
Kookmin Bank, Annual Report (2001) at page 58. 

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Shinhan and KorAm banks regarding the extension of the export credit arrangements, 
which was made at the same time as the Syndicated Loan. These banks had concluded 
that  they  were  already  over-exposed  to  Hynix  and  reversed  their  earlier  decision  to 
increase  the  export  credit  ceiling  available  to  Hynix.  In  response,  an  FSS  official 
criticised their move as “unthinkable”18. The GOK held 18,3% of Shinhan and was its 
largest shareholder, thus able to exert considerable influence over the bank. It is clear 
that Shinhan was not acting commercially given that it increased its loan loss reserves 
for Hynix even as it continued to assist the company and that it offered no legitimate 
credit  risk  analysis  for  assisting  it. KorAM  Bank  again  faced  GOK  threats  when  the 
bank  refused  to  purchase  Hynix  CBs,  because  it  decided  that  doing  so  was  not 
financially sound. In response to the bank’s decision not to purchase the bonds, an FSS 
official rebuked KorAm, using language uncharacteristic of a government apparently 
uninvolved  in  credit  decisions.  The  official  stated:  “If  KorAm  does  not  honour  the 
agreement, we will not forgive the bank.”19 He further stated that the FSS would take 
stern measures against the bank, such as disapproving new financial instruments and 
subjecting  the  bank  to  a  tighter  audit.20  As  a  result  of  these  threats,  KorAm  Bank 
capitulated and reversed its decision21, while at the same time increasing its loan loss 
reserves  for  Hynix  and  offering  no  legitimate  credit  analysis  for  providing  such 
financial  assistance.  Of  the  remaining  banks  which  participated  in  the  Syndicated 
Loan,  Chohung  Bank,  Woori  Bank,  the  NACF,  Seoul  Bank,  Kwangju  Bank,  Peace 
Bank, Kyongnam Bank and the Industrial Bank of Korea are all GOK-owned and thus 
their credit decisions are tainted by GOK policy. The Housing and Commercial Bank, 
of  which  the  GOK  has  a  20%  share,  admitted  government  direction  in  its  credit 
decisions in a sworn statement to the US SEC22. Finally, although Pusan Bank had no 
GOK ownership, it was nevertheless ordered by the FSS in 1999 to fire or replace its 
executives  and  to  increase  its  paid-in  capital  by  USD  86,2  million  before  the  end  of 
March  200023,  to  “slash  their  manpower,  the  number  of  branches  and  organisations, 
while  disposing  of  ailing  subsidiaries”24  and,  in  2000,  the  FSS  sanctioned  its  former 
and  current  officials  for  mismanagement25.  Given  this  degree  of  GOK  control  over 
Pusan  Bank,  the  bank’s  decision  to  participate  in  the  Syndicated  Loan  cannot  be 
considered to be a safe commercial benchmark. 

(21)  Third,  it  would  clearly  not  be  appropriate  to  use  Citibank  Seoul  as  a  benchmark  to 
determine the commercial reasonableness of participating in the Syndicated Loan, for 
the  reasons  set  forth  in  recitals  (130)  to  (133)  of  the  definitive  Regulation.  First, 
Citibank Seoul failed to cooperate in this investigation, thus forcing the Commission 
to  rely  on  facts  available  regarding  the  participation  of  Citibank  Seoul.  Second,  the 
evidence on the record discussed in recital (133) of the definitive Regulation reflects 

18 
19 
20 
21 

22 

23 
24 
25 

“Banks Under Fire for Reducing Export Credit Ceilings for HEI”, Korea Herald, January 27 2001. 
“KorAm Reluctantly Continues Financial Support for Hynix”, Korea Times, June 21 2001 
Ibid. 
See  “Koran  Bks  Complete  Purchase  of  KRW1T  Hynix  Conn  Bond,”  Dow  Jones  International  News, 
June 20 2001 (“KorAm Bank’s reversal of its board’s decision comes after the Financial Supervisory 
Service  warned  of  a  possible  sanction  for  KorAm  for  threatening  to  break  the  earlier  rescue  pact  for 
Hynix.”) 
Kookmin/H&CB Prospectus, 10 September 2001 (Micron Italia post hearing submission, 14 February 
2003 at Exhibit 9). 
“Pusan, Kyongnam Banks Receive Conditional Approval from FSS”, Korea Herald 18 January 1999 
Ibid. 
“Officials of NFLC, Pusan Bank Punished for Mismanagement”, Korea Herald, 29 April 2000 

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an unusually close relationship between the GOK and Citibank that calls into question 
the impartiality of Citibank in lending to Hynix. Third, Citibank itself was a financial 
advisor  to  Hynix  regarding  its  restructuring  and  thus  had  an  inherent  conflict  with 
respect to participation in new lending to Hynix26. It had not given financing to Hynix 
prior  to  becoming  Hynix’s  financial  advisor.  Fourth,  the  Panel  itself  recognised  that 
Citibank  cannot  serve  as  a  basis  for  determining  whether  any  of  the  loans  to  Hynix 
were made on the basis of commercial considerations.27 

(22)  Finally,  it  is  important  to  note  that  Hynix  defaulted  on  its  interest  payments  on  the 
Syndicated Loan almost as soon as the loan was given. As noted in recital (87) of the 
definitive  Regulation,  Hynix  had  not  been  servicing  the  Syndicated  Loan  that  it 
received in January 2001. 

(23)  Based on the foregoing, we conclude that none of the other seven participants in the 
Syndicated Loan can serve as an appropriate benchmark for measuring the commercial 
reasonableness  or  the  amount  of  benefit  to  Hynix  from  the  portions  of  the  loan 
provided by KEB and KDB. 

(24)  On this basis, we continue to find the participation of KEB and KDB in the Syndicated 
Loan to be a countervailable subsidy that provides a benefit to Hynix. However, as set 
out  in  recital  (37)  of  the  definitive  Regulation,  no  subsidy  amount  has  been 
countervailed  under  the  Syndicated  Loan  in  order  to  avoid  double-counting,  as  the 
Syndicated  Loan  amount  was  subsequently  rolled-over  into  the  October  2001 
measures.  Thus,  no  amendment  of  the  findings  is  necessary  with  regard  to  this 
measure. 

1.4.  Calculation of the amount of benefit 

(25)  The Panel found, at para 7.215 of its report, that the calculation of the amount of the 
benefit conferred by each of the financial contributions was inconsistent with Articles 
1.1(b) and 14 of the SCM Agreement. The GOK did not raise any claims challenging 
“as  such”  provisions  of  the  basic  Regulation  or  the  Guidelines28  relating  to  the 
calculation of the amount of the benefit. Thus, the Panel report only addressed how the 
EC applied these provisions and calculated the amount of the benefit with respect to 
the measures at issue in this proceeding (the definitive Regulation). 

(26) 

In particular, the Panel considered that the EC acted inconsistently with Article 1.1(b) 
and  14  of  the  SCM  Agreement  by  taking  as  a  starting  point  that  the  amount  of  the 
benefit conferred by each of  the  financial  contributions,  which  were  generally  in  the 
form  of  loans,  guarantees  or  equity,  was  to  be  calculated  as  if  those  financial 

26 
27 

28 

Provisional Regulation, recital (87). 
Panel report at footnote 185: 
“While it is certainly true that Citibank, and its subsidiary SSB, are not government owned at all, we 
consider that the EC sufficiently demonstrated that the close relationship with the government and the 
specific role as financial advisor to Hynix throughout the restructuring make Citibank particularly inapt 
to  serve  as  an  appropriate  market  benchmark  for  assessing  whether  the  government’s  financial 
contribution was in line with the normal market conditions, or whether it, on the contrary, conferred a 
benefit to Hynix. This is especially so given the very small participation in Hynix by Citibank, whose 
share of the total Hynix loans in October 2001 was 1,3 per cent. (Preliminary Deterimantion, para. 93).” 
Guidelines for the Calculation of the Amount of Subsidy in Countervailing Duty Investigations (Official 
Journal of the European Communities C 396/6 of 17.12.1998) (the ‘Guidelines’) 

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contributions  had  been  grants,  irrespective  of  their  terms  and  conditions.  The  Panel 
reasoned  that  the  calculation  of  the  amount  of  the  benefit  should  be  based  on  the 
benefit  to  the  recipient,  not  the  cost  to  the  provider.  It  further  reasoned  that  the 
provision  in  this  case  of  funds  to  Hynix  in  the  form  of  loans,  guarantees  and  equity 
may have been of less benefit to Hynix than if the funds had been provided in the form 
of  grants.  In  particular,  the  Panel  reasoned  that  the  funds  would  appear  as  debt  in 
Hynix’s balance sheet or would have given rise to the dilution of the ownership claims 
of existing shareholders in Hynix.29 

(27)  The Panel considered that, as a matter of WTO law, the correct starting point for the 
EC  in  this  case  must  be  the  search  for  an  alternative  benchmark  as  a  base  for  the 
calculation of the amount of benefit. The Panel particularly referred, at para 7.213 of 
its report, to “a comparable commercial loan which the firm could actually obtain on 
the  market”  (Article  14(b)  SCM  Agreement)  and  “a  comparable  commercial  loan 
absent  the  government  guarantee”  (Article  14(a)  SCM  Agreement).  The  Panel  also 
referred, by way of example, to so-called “junk bonds” or “vulture funds”.30 

(28)  The Panel observed that there may be circumstances in which there is an absence of 
any comparable benchmark, and that the investigating authority was and is entitled to 
considerable  leeway  in  adopting  a  reasonable  approach  to  calculating  the  amount  of 
the benefit to Hynix.31 

(29) 

In the light of the Panel’s findings, for each of the relevant financial contributions in 
the  measure  at  issue,  the  Commission  has  re-examined  all  of  the  relevant  facts  and 
evidence on the record, taking into account all of the submissions of interested parties, 
specifically  with  respect  to  possible  alternative  benchmarks,  including  “junk  bonds” 
and  “vulture  funds”,  and,  for  each  relevant  financial  contribution,  re-determined  the 
amount of the benefit to Hynix. 

(30)  The Commission has not re-examined or made any re-determinations with respect to 
any substantive or procedural matters confirmed by the Panel report or not found by 
the  Panel  to  be  inconsistent  with  the  SCM  Agreement,  including,  but  not  limited  to: 
Hynix’s  financial  situation  or  worth,  conditions  in  the  DRAM  market,  conditions  in 
the financial markets and the use of facts available. The Commission has limited itself 
to  the  specific  issue  that  is  the  subject  of  the  Panel’s  findings:  the  availability  of 
alternative benchmarks. 

(31) 

In making this re-determination, the Commission has based its calculation of subsidy 
on  a  “benefit  to  the  recipient”  and  not  on  a  “cost  to  the  government”  standard,  as  is 
required  by  Article  6  of  the  basic  Regulation,  consistent  with  the  Panel’s  reasoning, 
with  the  determinations  in  the  definitive  Regulation  and  with  the  Commission’s 
established  practice.32  In  this  regard,  the  Commission  notes  that  one  of  the  key 
features  of  the  SCM  Agreement  (Article  14)  following  the  Uruguay  Round  was  the 
confirmation that the “benefit to the recipient” standard would normally prevail over 
the “cost to the government” standard. The Commission further notes that the former 

29 
30 
31 
32 

Panel report, paras. 7.211 and 7.212. 
Panel report, footnote 186. 
Panel report, para 7.213 
The panel refers to the cost to the “provider of the financial contribution”, that is, the Government of 
Korea and the private banks which it directs. 

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will generally lead to a higher amount of subsidy than the latter, because it requires a 
comparison  with  commercial,  rather  than  governmental,  funding.  Consequently,  the 
Commission notes that the “cost to the government” approach would not generally be 
expected  to  lead  to  a  higher  amount  of  subsidy  than  the  “benefit  to  the  recipient” 
approach. 

(32)  Thus,  consistent  with  the  Panel’s  reasoning,  the  Commission  has  examined  the 
financial  contributions  “from  the  perspective  of  the  recipient”.  The  Commission  has 
done this by means of an objective examination of the information on the record of the 
case. The Commission has not enquired into what might have been the subjective state 
of mind of one or more Hynix executives at the time. Rather, it has enquired into what, 
objectively,  the  amount  of  the  benefit  would  have  been  for  a  company  in  exactly 
Hynix’s  situation  at  the  time.  Calculating  the  amount  of  the  benefit  from  the 
perspective of the recipient does not entail switching from an objective to a subjective 
basis of enquiry. 

1.5.  KEIC  Guarantee  for  Export  Credits  (D/A  extension)  in  the  amount  of 

USD 600 million 

(33)  The  Panel  summarised  the  facts  concerning  the  KEIC  Guarantee  in  the  following 

terms: 

“7.85  The  second  action  which  was  found  to  be  a  subsidy  was  the  extension  of  a 
guarantee  by  the  Korea  Export  Insurance  Corporation  (‘KEIC’)  which  is  the  official 
export credit agency of Korea. The KEIC provides export insurance and guarantees to 
manage  the  risk  associated  with  overseas  transactions.  In  January  2001,  fourteen 
Hynix  creditor  banks  increased  the  ceiling  of  the  export  credit  facility  for  D/A’s 
(documents against acceptance) provided to Hynix from USD 800 million to USD 1,4 
billion,  an  increase  of  USD  600  million,  The  KEIC  granted  the  short-term  export 
credit insurance for the extended D/A limit as regards the transaction between Hynix 
and its overseas subsidiaries. In other words, Hynix collects the foreseen payment for 
the export transaction from the banks concerned, which hold the D/A documents. The 
affiliated importer in the country of destination then makes the payments for the goods 
concerned directly to the banks against the D/A. Hynix pays KEIC a premium for the 
guarantee  and  pays  interest  to  the  banks  concerned  for  the  D/A  amounts  withdrawn 
until the importer makes the final payment. The KEIC insurance covers the amounts 
due to the banks which cannot be collected due to the bankruptcy of either the exporter 
or the importer.”33 

(34)  The  Panel  found  that  the  EC  reached  a  reasonable  and  reasoned  conclusion  on  the 
basis of the record before it that the KEIC Guarantee conferred a benefit to Hynix.34 In 
doing  so,  it  recalled  that  the  KEIC  itself  was  hesitant  to  provide  the  guarantee  on 
Hynix’s debt and needed its own guarantee from the GOK.35 However, as regards the 
amount  of  the  benefit,  the  Panel  report  indicates  that  the  EC  should,  as  a  matter  of 

33 
34 
35 

Panel report, para.7.85. 
Panel report, paras 7.189 to 7.192. 
Panel report, para 7.189. 

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14 

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WTO  law,  re-examine  the  question  of  the  availability  of  alternative  benchmarks  for 
calculating the benefit to Hynix.36 

(35)  As the Panel observed, the question of benefit in the case of a government guarantee 

can be examined from more than one angle.37 

(36)  One reasonable method of enquiring into the amount of benefit from such a measure 
might  be  to  compare  the  guarantee  provided  by  the  government  with  a  comparable 
guarantee provided by the market.38 

(37)  A  second  reasonable  method  is  indicated  by  Article  6(b)  of  the  basic  Regulation 
(which generally corresponds to Article 14(b) of the SCM Agreement), which refers to 
government  loans;  and  Article  6(c)  of  the  basic  Regulation  (which  generally 
corresponds to Article 14(c) of the SCM Agreement), which refers to a loan guarantee 
by  a  government.39  In  this  case,  the  “loan  guaranteed  by  the  government”  is  the 
revolving  amount  of  debt  outstanding  at  any  time  owed  by  the  Hynix  group,  via  its 
affiliated  importers  in  various  countries  of  export,  to  the  banks,  in  respect  of  export 
transactions where payment has yet to be made, but funds have already been advanced 
by  the  banks  to  Hynix.  The  financial  contribution  under  consideration  related  to  the 
extension  of  the  facility  by  USD  600  million.  However,  the  facility  itself  had  an 
overall ceiling of USD 1,4 billion. 

(38)  The  Commission  has  re-examined  the  extensive  record  in  this  case  and  considered 
whether there is any relevant benchmark against which the amount of the benefit could 
be  calculated.  First,  the  Commission  considered  whether  Hynix  had  received  new 
loans  at  the  time  that  the  USD  600  million  increase  had  been  granted.  The  record 
demonstrates,  however,  that  no  new  commercially  comparable  lending  had  been 
provided. Second, the Commission looked for verified evidence regarding the cost and 
terms  of  a  comparable  commercial  guarantee  or  a  “comparable  commercial  loan 
absent the government guarantee” that Hynix or another firm in a situation comparable 
to Hynix concluded at the relevant time. A comparable commercial loan would ideally 
be one of approximately the same size, would related to the same or a similar sector of 
economic activity, would involve a comparable type of activity, such as export credit 
insurance,  and  would  have  been  concluded  at  approximately  the  same  time.  It  could 
not involve any government guarantee, express or implied, and would need to involve 
a firm in a comparable financial situation to that of Hynix. 

(39)  Having conducted this re-examination, the Commission has determined that there is no 
reliable  information  on  the  record  regarding  these  matters.  The  Commission  has  not 
found any such benchmark as regards Hynix itself. The loans provided to Hynix were 
generally either provided by the GOK or by banks that were entrusted and directed by 
the  GOK,  and  the  rate  on  the  Syndicated  Loan  would  also  be  an  inappropriate 
benchmark for the reasons stated in recitals (17) to (20) above. Lending from Citibank 
Seoul is also not an appropriate benchmark for the reasons stated in recital (21) above. 
Citibank’s  participation  was  insufficiently  significant,  was  influenced  by  the 
participation  of  other  lenders  and  the  GOK  and  was  distorted  by  both  its  interest, 

36 
37 
38 
39 

Panel report, para 7.213. 
Panel report, para 7.189. 
Panel report, para 7.189. 
Panel report, para 7.189. 

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together with SSB, as Hynix’s financial advisor and its long-term relationship with the 
GOK. In any event, Citibank did not co-operate in the investigation. 

(40)  Given Hynix’s financial condition, there are no Hynix-specific benchmarks that can be 
used  and  there  is  no  data  on  the  record  regarding  loans  to  companies  in  a  similar 
financial condition to Hynix. Moreover, the available information indicates that Hynix 
did  not  obtain,  and  would  not  have  been  able  to  obtain,  the  relevant  funds  in  the 
market.40  The  KEIC  export  credit  guarantee  programme  and  the  KDB  Debenture 
Programme  were  in  effect  throughout  2001.  During  this  period,  Hynix  was,  by  all 
measures,  uncreditworthy,  Hynix’s  already  dismal  financial  condition  worsened 
markedly in 2000, when the company suffered a net loss of over KRW 2 trillion. At 
year-end  2000,  Hynix’s  total  indebtedness  was  KRW  8  trillion,  and  Hynix’s  current 
ratio,  which  measures  the  degree  to  which  a  firm’s  current  assets  cover  current 
liabilities,  was  0,33.41  Hynix’s  net  profit  margin  fell  from  2.08%  in  1999  to  minus 
24,03%  in  2000  (when  the  DRAM  industry  as  a  whole  performed  well)  and  minus 
93,83%  in  2001.42  Clearly,  during  2000  and  2001,  Hynix  was  unable  to  generate 
adequate cash flow to cover its existing debt, much less new debt. 

(41)  Market  analysts  agreed  that  Hynix  was  not  creditworthy  during  this  period.  Hynix’s 
Standard & Poor’s rating was B- in March 2001, CCC+ in August 2001 and “selective 
default”  in  October  2001.  In  January  2001,  UBS  Warburg  explained  that  Hynix’s 
“debt  refinancing  agreement  with  KDB…merely  puts  off  the  evil  day  but  does  not 
solve {Hynix’s} core problem, that it is not profitable and is not paying off debt at a 
sufficiently  fast  rate  from  internal  cash  flow  or  asset  disposals.”43  UBS  Warburg 
subsequently  stated  that  Hynix’s  lack  of  product  diversity  was  a  concern  and  that 
Hynix’s excessive focus on commodity DRAMs would contribute to its “deteriorating 
fundamentals”  throughout  the  first  half  of  2001.44  Similarly,  in  February  2001, 
Deutsche Bank posited the cash flow problem  bluntly:  “We  believe  the  most  critical 
concern for {Hynix} is its ongoing cash flow concerns. In our view, it is unlikely that 
the Korean Government would be willing to give up on the company yet….We believe 
{Hynix’s}  financial  crisis  will  continue  to  carry  a  heavy  burden  on  its  ability  to 
recover,  as  the  DRAM  sector  is  perhaps  the  most  capital-intensive  sector  within 
semiconductors, with a constant requirement to upgrade technology processes.”45 

(42) 

In  February  2001,  in  an  article  in  the  Korea  Herald46,  another  market  expert  stated 
that: “Given the fact that credit risk is still pronounced and haunting investors, I don’t 
think fluent capital will flow into corporate bonds rated below BBB+”. This coincides 

40 
41 

42 
43 

44 

45 

46 

Definitive Regulation, Recitals (87), (101) to (112). 
The  “target  ratio”  for  healthy  firms  is  2,0  or  better,  and  a  ratio  below  1,0  “signals  a  firm  in  extreme 
financial distress.” Expert Report of Anthony Saunders, at p.12. The Commission notes that although 
Hynix’s current ratio improved somewhat to 0,65 in 2001, this improvement was solely attributable to 
the  October  2001  restructuring,  which  enabled  Hynix  to  drastically  reduce  the  current  portion  of  its 
long-term debt and, thus, its current liabilities. Ibid. 
Saunders Report at p. 18. 
“Korea Daily Comment: Hyundai Electronics,” UBS Warburg, January 4 2001, at p. 2 (Micron Italia, 
14 February 2003, post-hearing submission at Exhibit 64). 
“Hyundai Electronics,” UBS Warburg, January 8 2001, at p. 7 (Micron Italia, 14 February 2003, post-
hearing submission at Exhibit 19). 
“Hyundai Electronics Inc. Digging a Deeper Hole,” Deutsche Bank, February 23 2001, at p. 8 (Micron 
Italia, 14 February 2003, post-hearing submission at Exhibit 66). 
The Korea Herald, 15 February 2001 

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with  the  early  period  of  the  KEIC  Guarantee  and  KDB  Debenture  Programme.  The 
article goes on to point out the yield difference between investment grade bonds and 
junk bonds, concluding that “this indicates that investors  continue to shun low-grade 
corporate bonds, expanding the spread between high-credited bonds and the so-called 
junk bonds to their widest margin”. A press report in June 2001 stated that “Investors 
have  started  gazing  down  the  Asian  credit  curve,  but  they  still  lack  the  nerve  to  eye 
corporates  with  ratings  below  the  bottom  rung  of  investment  grade  at  BBB-minus. 
Only companies with strong cash flows, ability to service debt and growth prospects 
are likely to make them look.”47 Another report stated that “Especially in the latter half 
of last year, it was nearly impossible for a company to issue junk bonds based on its 
own  credit  and  the  junk  bonds  market  existed  through  primary  collateralised  bond 
obligations,  collateral  loan  obligations  and  a  government-initiated  bond-refinancing 
plan.”48  

(43)  Thus,  the  Commission  confirms  its  original  finding  that  Hynix  fell  short  of  the 
investment grade required by investors for the junk bond market; and that, during the 
IP, the type of capital markets referred to by the Panel were inaccessible to companies 
with prospects as weak as those of Hynix. Accordingly, such information as is on the 
record does not permit the establishment of a reliable benchmark with respect to such 
markets. 

(44)  The  Commission  would  therefore  be  in  a  position  to  reasonably  and  objectively 
conclude that no alternative commercial benchmark would actually be available in this 
case.  Accordingly,  in  these  circumstances,  the  Commission  finds  that  the  amount  of 
the  benefit  to  Hynix  could  not  exceed  the  full  amount  of  the  loan,  plus  compound 
interest  and  the  costs  of  recovery  or  attempted  recovery  in  the  event  of  default. 
Because  there  is  also  no  reliable  information  on  the  record  regarding  these  latter 
additional costs, the Commission has confined itself to the full amount of the loan. The 
Commission  believes  that  this  conclusion  is  fully  supported  by  its  (unchanged) 
determinations regarding the financial situation and worth of Hynix, and the situation 
in the DRAMs market and the financial markets, and that it is consistent with the basic 
Regulation and the Guidelines. 

(45)  However, mindful of the WTO Panel’s reasoning, the Commission has, exceptionally 
and  for  this  reason  only,  also  considered  whether  or  not,  even  absent  any  relevant 
benchmarks,  there  is  anything  that  might  serve  as  the  basis  for  a  proxy  benchmark, 
adjusted where necessary to take account of the particular circumstances of this case. 
Such  a  proxy  could,  for  example,  be  based  on  a  commercial  interest  rate,  with  the 
addition  of  a  risk  premium,  reflecting  the  default  rates  of  companies  exhibiting 
comparable  risk.  Such  a  calculation  would  take  into  account  the  term  of  the  loan,  a 
benchmark interest rate that would be paid by a creditworthy company, the probability 
of  default  by  an  uncreditwothy  company  within  a  specified  period  of  time  and  the 
probability of default by a creditworthy company within the same specified period of 
time.  This  approach  is  premised  on  the  commonly  understood  notion  that  when  a 
lender makes a loan to a company that is considered to be uncreditworthy, the lender 
faces higher probability that the borrower will default on repayment of the loan. As a 
consequence of this higher default probability, the lender will charge a higher rate of 

47 
48 

Reuters News, 21 June 2001 
The Korea Herald, 13 June 2001 

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interest,  and  one  that  is  in  proportion  to  the  increased  probability  of  default. 
Essentially,  this  would  entail  taking  an  interest  rate  available  in  the  market  to 
creditworthy borrowers and adding a “risk premium” to it in order to account for the 
increased risk associated with lending to a company that is not creditworthy. 

(46)  For purposes of implementing the Panel’s report in this case, the Commission has used 
the  following  formula  to  calculate  an  appropriate  uncreditworthy  benchmark  interest 
rate: 

ib = [(1-qn)(1+if)n/(1-pn)]1/n -1 

Where:  

n = the term of the loan 

ib = the benchmark interest rate for an uncreditworthy borrower 

if = the long-term interest rate that would be paid by a creditworthy company 

pn = the probability of default by an uncreditworthy company within n years 

qn = the probability of default by a creditworthy company within n years. 

(47)  For the purposes of this implementation, the Commission has used as the creditworthy 
(or “commercial”) rate for USD loans the average USD lending interest rate for 2001, 
which,  according  to  the  IMF  International  Financial  Statistics  Service,  was  6,922%. 
Although the credit received by Hynix by virtue of the guarantee was short term, the 
measure  under  consideration,  i.e.,  the  guarantee  itself,  was  in  fact  a  form  of  rolling 
credit.  The  Commission  used  data  from  Moody’s  Investor  Service  to  obtain  default 
rates for creditworthy and uncreditworthy companies. For the uncreditworthy rate, the 
Commission used the likelihood of default for companies with a credit rating of Caa to 
C  during  the  term  of  the  relevant  measure  (i.e.,  one  year  for  the  KEIC  Guarantee). 
Similarly, the Commission used the default rate for a creditworthy company during the 
term  of  the  measure  in  question,  calculated  based  on  a  cumulation  of  data  for 
investment  grade  companies.  The  rate  of  default  of  an  uncreditworthy  company  in 
2001  within  one  year  was,  according  to  Moody’s,  34,34%.  The  rate  of  default  of  a 
creditworthy  company  in  2001  within  one  year  was  0,13%.  This  led  to  total  interest 
rate  of  62,70%.  In  contrast,  the  interest  rate  payable  by  Hynix  on  the  USD  loans  in 
question was 8,33%, i.e., a total interest differential of 54,37%. 

(48)  The  Commission  recalls  that,  normally,  having  determined  that  the  benefit  is 
equivalent to the full amount of the financial contribution (in this case, a loan or loan 
guarantee), the Commission treats it as a “non-recurring” subsidy and allocates it over 
a  period  of  time  corresponding  to  the  normal  depreciation  of  fixed  assets  in  the 
industry  concerned.  The  Commission  uses  a  straight-line  allocation  and  does  not 
increase  the  total  amount  of  benefit  by  using  the  “time  value  of  money”  method;  it 
merely adds interest to each annual allocated portion. In this case, the allocation period 
was  five  years  and  no  additional  costs  were  added  to  the  full  amount  of  the  loan  as 
explained  in  recital  (44)  above,  which  means  that  20%  of  the  financial  contribution 
was allocated to each year. 

EN 

18 

   EN 

 
(49)  Had the Commission used an interest rate comparison as described in recitals (45) to 
(47)  above,  the  benefit  (i.e.,  the  difference  between  the  benchmark  and  the  actual 
interest  rate)  would  have  been  considered  as  a  recurring  subsidy.  The  amount  of 
subsidy allocated to each year would have been the interest rate differential multiplied 
by  the  fact  amount  of  the  loan.  Therefore,  depending  on  the  size  of  the  interest  rate 
differential,  the  terms  and  conditions  of  the  loan,  and  the  length  of  the  depreciation 
period,  the  annual  benefit  obtained  by  making  an  interest  rate  comparison  may  be 
bigger  or  smaller  than  that  which  results  from  the  application  of  the  Commission’s 
original approach. 

(50) 

In this case, the Commission’s original approach would result in an allocated annual 
benefit of 20% of the financial contribution. Depending on the exact terms of the loan, 
i.e., whether the beneficiary repays interest and capital or interest only each year, this 
amount would be reached with an interest rate differential of no less than 20% and no 
more than about 35% per year. The actual interest differential in this case is 54,37%. 
This means that a strict application of this method would result in a much higher rate 
of  countervailable  subsidy  allocated  on  turnover,  in  fact  12,8%  instead  of  the  5,1% 
originally calculated by the Commission. 

(51)  Consequently,  the  Commission  considers  that  its  original  approach  was  and  is 
reasonable  in  this  case.  Indeed,  it  is  only  in  extreme  cases  that  the  Commission  will 
determine the amount of the benefit to be equivalent to the full amount of a loan (i.e., 
when  there  is  no  realistic  possibility  of  repayment)  and  in  such  circumstances  it  is 
usual  that  the  benchmark  interest  rate  will  be  extremely  high.  Therefore,  the interest 
rate differential will often give a higher amount of benefit than a simple allocation of 
the  face  amount  of  the  loan  over  time.  In  these  circumstances,  the  Commission  has 
used  the  more  conservative  of  the  two  options  in  order  to  be  sure  that  it  has  not 
exaggerated the amount of the subsidy, and will treat the face amount of the loan as 
the basis for a cap on the maximum amount of the benefit. 

(52)  On  the  above  basis,  the  amount  of  benefit  conferred  by  the  KEIC  Guarantee  ad 

valorem of export turnover was 5,1%. 

1.6.  KDB Debenture Programme 

(53)  The  Panel  summarised  the  facts  concerning  the  KDB  Debenture  Programme  in  the 

following terms: 

“7.88  A  third  programme  found  to  constitute  a  subsidy  by  Korea  was  the  KDB 
Debenture  Programme  to  which  Hynix  was  admitted  on  4  January  2001.  This  was  a 
programme  which  essentially  lasted  for  one  year  (2001)  and  was  set-up  by  the 
government in response to financial instability in Korea caused by the fact that a large 
amount  of  bonds  issued  by  a  few  companies  (including  Hynix)  were  due  to  mature 
simultaneously.  Under  this  Programme,  maturing  debt  was  rolled-over  and  re-
packaged for investors. A participating company repaid on its own 20 per cent of its 
corporate  bonds  falling  due  and  the  KDB  assumed  the  remaining  80 per  cent.  This 
constituted the first phase of the programme. Of the 80 per cent originally assumed by 
the KDB, 20 per cent of the bonds was then sold to the company's creditor banks in 
proportion to their debt exposure to the company; 70 per cent was re-packaged for sale 
to  investors  as  collateralised  bond  obligations  (‘CBOs’)  and/or  collateralised  loan 
obligations (‘CLOs’), guaranteed by the Korea Credit Guarantee Fund (‘KCGF’);1 and 

EN 

19 

   EN 

 
 
 
the  KDB  retained  the  remaining  10 per  cent.  The  participating  company  had  to 
repurchase  at  least  3 per  cent  of  any  CBOs  and  5 per  cent  of  any  CLOs.2 

7.89  We  note  that  companies  were  placed  in  the  Programme  upon  nomination  by 
the main creditor bank, and needed the approval by the Creditors Financial Institutions 
Council  (‘CFIC’),  based  on  an  assessment  of  the  company's  financial  future.  The 
CFIC consisted of representatives of the KCGF, the KDB and seventeen other creditor 
banks.3  The  CFIC  ultimately  decided  on  participation  in  the  programme.  If  banks 
holding  75 per  cent  of  the  loans  of  the  company  agreed  to  the  participation  of  the 
company  in  the  Programme,  the  CFIC  considered  the  decision  unanimous.  To  be 
placed  in  the  Programme,  companies  had  to  be  able  to  repay  20 per  cent  of  their 
maturing  bonds;  normalise  business  operations  through  a  rescue  plan;  have  credit 
ratings  below  A  but  higher  than  BB;  and  agree  to  any  change  in  majority 
shareholdings requested by their creditor banks, or to the replacement of management 
in case of insolvency. Hynix was admitted to the programme on 4 January 2001 with a 
credit rating of BBB-. In total six companies were admitted; four of which, including 
Hynix, belonged to the Hyundai group.4 The EC found that the bond purchase by the 
KDB as part of this programme constituted a financial contribution by the government 
which conferred a benefit on Hynix. 

1 The CBO's and CLO's are asset backed securities that are sold to investment trusts. 

2 Preliminary Determination, paras. 47-48. 

3 Id., para. 49. 

4 Id., paras. 49-52. The EC states that the budget for the programme was KRW 6.2 trillion, of 
which  KRW  2.9  trillion  was  ear-marked  for  Hynix;  eventual  expenditure  being  KRW  2.9 
trillion  of  which  KRW 1.2 trillion  (41 per  cent)  for  Hynix  and  38 per  cent  was  used  for  the 
other three Hyundai companies.”49 

(54)  The  Panel  found  that  the  EC  reached  a  reasonable  and  reasoned  conclusion  on  the 
basis of the record before it that the KDB Debenture Programme conferred a benefit 
on Hynix. In doing so, it recalled that the KDB Debenture Programme was itself set up 
and  effectively  guaranteed  by  the  GOK.50  However,  as  regards  the  amount  of  the 
benefit,  the  Panel  report  indicates  that  the  Commission  should,  as  a  matter  of  WTO 
law, re-examine the question of the availability of alternative benchmarks. 

(55)  As  the  Panel  observed,  the  question  of  benefit,  at  least  in  the  case  of  a  government 
guarantee,  can  be  examined  from  more  than  one  angle,51  and  in  applying  the 
guidelines contained in Article 14 of the SCM Agreement, an investigating authority is 
entitled  to  considerable  leeway.52  The  KDB  Debenture  Programme,  for  example, 
exhibits some of the characteristics of a guarantee, insofar as the entire measure was 
set-up,  sponsored,  and  effectively  guaranteed  by  the  GOK  or  a  GOK  public  body. 
Thus,  one  reasonable  method  of  enquiring  into  the  amount  of  benefit  of  such  a 
measure  might  be  to  compare  the  guarantee  provided  by  the  government  with  a 

49 
50 
51 
52 

Panel report, paras 7.88 and 7.89. 
Panel report, paras. 7.194 to 7.199. 
Panel report, para. 7.189. 
Panel report, para. 7.213. 

EN 

20 

   EN 

 
 
                                                 
comparable guarantee provided by the market. The KDB Debenture Programme might 
also be considered in the light of Article 6(b) of the basic Regulation (which generally 
corresponds  to  Article  14(b)  of  the  SCM  Agreement),  which  refers  to  government 
loans; and Article 6(c) of the basic Regulation (which generally corresponds to Article 
14(c) of the SCM Agreement), which refers to a loan guarantee by a government. 

(56)  The Commission has re-examined the record to consider whether there is any relevant 
benchmark against which the amount of the benefit could be calculated. It has looked 
for  verified  evidence  about  a  comparable  government  guarantee  or  “a  comparable 
commercial  loan”  or  “a  comparable  commercial  loan  absent  the  government 
guarantee” that Hynix or another firm in a situation comparable to Hynix concluded at 
the  relevant  time.  A  comparable  commercial  loan  would  ideally  be  one  of 
approximately the same size, would relate to the same or a similar sector of economic 
activity, would involve a comparable type of activity, and would have been concluded 
at  approximately  the  same  time.  It  could  not  involve  any  government  guarantee, 
express  or  implied,  and  would  need  to  involve  a  firm  in  a  comparable  financial 
situation to that of Hynix. 

(57)  Having  conducted  this  re-examination,  the  Commission  has  determined  that  a 
commercial  benchmark  meeting  these  criteria  was  not  available  in  this  case.  Hynix 
itself  did  not  sell  any  corporate  bonds  into  the  commercial  market  at  the  time  it 
participated  in  the  KDB  Debenture  Programme.  In  fact,  one  of  the  threshold  criteria 
for participation in the KDB Debenture Programme was that the company in question 
could not obtain loans or sell bonds on the normal commercial market. Moreover, as 
noted in recital (53) of the definitive Regulation, Hynix provided no evidence on the 
record that it tried to access foreign debt markets during this period. In addition, the 
fact  that  the  international  ratings  agency  Standard  and  Poor’s  downgraded  Hynix’s 
debt to a speculative rating of “B-” makes it unlikely that Hynix would have been able 
to access foreign bond or loan markets, even if it had tried to do so. Even the Korean 
government  itself  noted  in  January  2001  that  Hynix  was  “in  a  state  of  technical 
insolvency.”53 

(58)  Moreover, other lending to Hynix during the period that the KDB rolled over Hynix’s 
maturing  bonds  cannot  serve  as  a  basis  for  measuring  whether  a  benefit  to  Hynix 
exists. For the reasons noted in recitals (17) to (22) above, the loans provided as part 
of  the  Syndicated  Loan  cannot  serve  as  an  appropriate  basis  of  comparison.  The 
lending made pursuant to the Syndicated Loan was so distorted by the government’s 
intervention in that loan that it cannot serve as a reasonable commercial benchmark by 
which to measure whether a benefit has occurred or the amount of that benefit. In this 
regard, the Commission recalls that the Syndicated Loan itself was made possible by 
the GOK waiving the lending limits for three key participants in that loan. Absent the 
participation of these three banks in the syndicate, it is unclear whether the loan would 

53 

EN 

See “Direct Intervention by the Government in Supporting Hynix,” Korea Economic Daily, 28 August 
2001  (reporting  on  the  discovery  by  the  Korean  National  Assembly  of  correspondence  between  the 
Korean  Economic  Ministers  and 
to 
Hynix)(Attachment 1 to Micron Italia’s 14 May 2003 submission on the provisional Regulation). 

to  provide  assistance 

the  KEIC  directing 

the  KEIC 

21 

   EN 

 
                                                 
have  been  able  to  go  forward  at  all,  given  that  it  would  have  been  significantly 
undersubscribed.54  

(59)  Further,  the  convertible  bonds  purchased  by  private  bodies  as  part  of  the  May  2001 
Restructuring Programme cannot serve as a benchmark because, although the evidence 
on record did not rise to the level sufficient for a finding of entrustment or direction, it 
indicates  a  level  of  government  involvement  that  makes  the  participation  by  private 
creditors  an  inappropriate  measure  of  the  commercial  reasonableness  of  the  CB 
purchases:  the  creditor  banks  themselves  acknowledged  in  the  7  May  2001  Creditor 
Financial  Institution  resolution  that  Hynix  was  unable  to  service  its  debts  in  May 
200155 and the GOK was clearly heavily involved in overseeing the completion of the 
May  2001  CB  offering,  going  as  far  as  having  a  high  level  FSS  official  attend  the 
March 2001 meeting of the Creditor Council56. Further, a comparable commercial loan 
which  could  serve  as  a  benchmark  is  one  which  is  concluded  at  approximately  the 
same period of time; the CB offering took place five months after the KDB Debenture 
Programme, when both Hynix’s financial situation and the state of the DRAMs market 
were markedly different. 

(60)  As  already  indicated  above,57  no  other  comparable  commercial  benchmark  was 
actually  available  in  the  market.  On  the  contrary,  the  available  information  indicates 
Hynix would not have obtained the relevant funds in the market.  

(61)  The  Commission  would  therefore  be  in  a  position  to  reasonably  and  objectively 
conclude that no alternative commercial benchmark would actually be available in this 
case. Accordingly, under these circumstances, the Commission finds that the amount 
of  the  benefit  to  Hynix  could  not  exceed  the  full  amount  of  the  funds  obtained  by 
Hynix as a result of the operation of the KDB Debenture Programme, plus compound 
interest  and  the  costs  of  recovery  or  attempted  recovery  in  the  event  of  default. 
Because  there  is  also  no  reliable  information  on  the  record  regarding  these  latter 
additional  costs,  the  Commission  has  confined  itself  to  the  full  amount  of  the  funds. 
The  Commission  believes  that  this  conclusion  is  fully  supported  by  its  (unchanged) 
determinations regarding the financial situation and worth of Hynix, and the situation 
in the DRAMs market and the financial markets, and that it is consistent with the basic 
Regulation and the Guidelines.  

(62)  However, mindful of the WTO Panel’s reasoning, the Commission has also considered 
whether  or  not,  even  absent  the  availability  of  any  appropriate  commercial 
benchmarks,  there  is  anything  that  might  serve  as  the  basis  for  a  proxy  benchmark, 
adjusted where necessary to take account of the particular circumstances of this case. 
Such a proxy could, for example, be calculated along the lines already indicated above 
in recitals (45) and (46) with respect to the KEIC Guarantee.  

54 

55 
56 
57 

As stated in Recital (53) of the definitive Regulation, Hynix had originally requested a Syndicated Loan 
of 1 trillion won, but was only able to raise 800 billion won. If the three banks which accounted for 300 
billion of the 800 billion total were unable to participate without the GOK’s specific permission, it is 
highly speculative that the remaining banks would have gone forward with the loan.  
Panel Report, para. 7.104. 
Panel Report, para. 7.97. 
Recitals (17) to (22), (56) and (57). 

EN 

22 

   EN 

 
                                                 
(63)  For the purposes of this calculation, and as suggested by GOK, the Commission has 
used as the creditworthy rate for KRW loans the IMF International Financial Statistics 
rate on short-term KRW denominated-lending, which was 7,7%. The default rates for 
both  creditworthy  and  uncreditworthy  companies  for  the  term  of  the  measure  in 
taken  from  Moody’s  Investor  Services  (0,13%  and  34,37% 
question  were 
respectively).  This  led  to  a  total  interest  rate  of  63,89%.  In  contrast,  the  average 
interest rate payable by Hynix on the KDB debentures in question was 12,7%, i.e., a 
total interest rate differential of 51,19%. 

(64)  Viewing  the  financial  contribution  as  a  recurring  subsidy,  rather  than  as  a  non-
recurring subsidy to be allocated over time, and applying this model to the calculation 
of the amount of the benefit in the financial contribution under consideration, would 
lead  to  an  amount  of  benefit  of  626,9  billion  KRW,  resulting  in  a  countervailable 
subsidy allocated on  turnover  of 11,8%, instead of the 4,9% originally calculated by 
the  Commission.  Consequently,  the  Commission  considers  that  its  original  approach 
was and is reasonable in this case, as the interest rate differential would give a much 
higher amount of benefit than a simple allocation of the face amount of the loan over 
time. In  these  circumstances, the Commission has used the more conservative of the 
two options in order to be sure that it has not exaggerated the amount of the subsidy 
and  will  treat  the  face  amount  of  the  loan  as  the  basis  for  a  cap  on  the  maximum 
amount of the benefit. 

(65)  Taking the amount of the funds obtained by Hynix as a result of the operation of the 
KDB  Debenture  Programme  as  a  cap  on  the  maximum  amount  of  the  benefit,  the 
Commission finds that the amount of benefit to Hynix in the financial contribution at 
issue ad valorem of turnover was 4,9%. 

1.7.  October  2001  Rescue  Package,  consisting  of  Dept  to  Equity  Swap, 
Second Roll-over of Dept and Provision of New Loan of KRW 658 billion 

(66)  The  Panel  summarised  the  facts  concerning  the  October  2001  Restructuring 

Programme in the following terms: 

“7.111 The  fifth  and  final  programme  considered  to  constitute  a  subsidy  was  the 
October  2001  Restructuring  Programme.  On  4  October  2001,  a  second  Hynix  CFIC 
was set up in accordance with the provisions of the Corporate Restructuring Promotion 
Act  (‘CRPA’).  The  CRPA  was  enacted  in  August  2001  and  its  purpose  was  to 
facilitate  corporate  restructuring,  which  before  was  based  on  agreements  between 
creditor banks and the companies concerned. The CFIC consisted of a hundred and ten 
financial 
trust 
companies. The decisions of the CFIC were taken by a 75 per cent majority. The votes 
were allocated in proportion of each institution's exposure to the total loans to Hynix. 
Any  financial  institution  exercising  its  dissenter's  rights  by  disagreeing  with  a  CFIC 
resolution would be excluded from the CFIC permanently. In its second meeting held 
on 31 October 2001, the CFIC decided on a "second restructuring package" for Hynix. 
The following measures were proposed: 

including  seventeen  banks  and  fifteen 

institutions 

investment 

(a) 

provision of new loan of KRW 1 trillion to Hynix with an interest rate of 7 per 
cent; 

(b) 

debt to equity swap by provision of bonds convertible into shares; 

EN 

23 

   EN 

 
 
 
(c) 

extending the maturities of existing loans until 31 December 2004, converting 
the maturing corporate bonds into corporate  bonds  with  a  three  year maturity 
and  an  interest  rate  of  6,5 per  cent  and  adjusting  the  interest  rate  of  the 
remaining loans in Korean currency to 6 per cent. 

7.112 The  financial  institutions  were  given  three  options  by  the  CFIC  in  the  31 
October meeting. The first option was to agree with the proposals by extending new 
credit  and  participating  in  a  debt-to-equity  swap  ("Option  1").  Secondly,  the  banks 
which did not want to participate in the new loan were obliged to swap 28.5 per cent 
of their loans into equity and waive the rest of the Hynix debt ("Option 2"). Thirdly, 
the  CFIC  also  decided  that  those  banks  which  objected  to  the  measures  and  used 
their dissenter's rights would have their loans purchased back at the liquidation value 
as  established  by  Arthur  Andersen,  the  firm  that  was  commissioned  to  conduct  a 
study on the financial situation of Hynix at the time ("Option 3"). 

7.113 Nevertheless, only six banks agreed to extend new credit, which amounted to 
KRW 658 billion  instead  of  the  planned  KRW  1  trillion.  These  banks  swapped  a 
considerable amount of their loans into equity. These so-called Option 1 banks were 
the KEB, Woori Bank, Chohung Bank, KDB, NACF and Citibank.111 Eight banks 
refused to extend new loans, so they swapped approximately one-third of their loans 
into  equity  and  wrote-off  the  rest  as  a  loss.  The  remaining  banks  objected  to  the 
restructuring  and  elected  to  receive  the  liquidation  value  of  their  loans,  and  had  to 
write the remaining debt off as a loss. The loans remaining with the banks of the first 
category  were  subject  to  maturity  extensions  and  interest  rate  cuts  as  explained 
above.112 The EC considered that the participation by the six Option 1 banks in the 
October  2001  Restructuring  Programme  constituted  a  financial  contribution  by  the 
government  which  conferred  a  benefit  on  Hynix.  The  rate  of  subsidization  for  this 
October 2001 Restructuring Programme was calculated to be 19,4 per cent. 

111  Preliminary  Determination,  para.  77.  The  KDB  did  not  participate  in  the  new  loan  of 
KRW 658 billion. 

112 Id., paras. 69-71.” 

(67)  The  Panel  found  that  the  EC  reached  a  reasonable  and  reasoned  conclusion  on  the 
basis of the record before it that the October 2001 Restructuring Programme conferred 
a benefit on Hynix.58 However, as regards the amount of the benefit, the Panel report 
indicates that the EC should, as a matter of WTO law, re-examine the question of the 
availability of alternative benchmarks. 

i. 

Debt to Equity Swap 

(68)  As  the  Panel  indicated,  in  approaching  the  question  of  benefit  in  the  case  of  the 
government  provision  of  equity  capital  and  in  applying  the  guidelines  contained  in 
Article 14 of the SCM Agreement, an investigating authority is entitled to considerable 
leeway.59 The Commission considers that the debt to equity swap in the October 2001 
Restructuring  Programme may  be considered in the light of Article 6(1) of  the  basic 
Regulation  (which  generally  corresponds  to  Article  14(a)  of  the  SCM  Agreement), 

58 
59 

Panel report, paras. 7.204 to 7.210. 
Panel report, para 7.213. 

EN 

24 

   EN 

 
                                                 
which  refers  to  government  provision  of  equity  capital  inconsistent  with  the  usual 
investment practice, including for the provision of risk capital, or private investors in 
the  territory  of  the  relevant  Member.  The  Commission  notes  that,  unlike  sub-
paragraphs (b) and (c), sub-paragraph (a) contains no final sentence providing further 
guidance on how the amount of the benefit is to be calculated. 

(69)  The Commission has re-examined the record to consider whether there is any relevant 
benchmark against which the amount of the benefit could be calculated. It has looked 
for verified evidence about a comparable private provision of equity capital that Hynix 
or another firm in a situation comparable to Hynix concluded at the relevant time. A 
comparable provision of equity ideally would be one of approximately the same size, 
would  related  to  the  same  or  a  similar  sector  of  economic  activity,  would  involve  a 
comparable type of activity and would have been concluded at approximately the same 
time.  It  could  not  involve  any  government  guarantee,  express  or  implied,  and  would 
need to involve a firm in a comparable financial situation to that of Hynix. 

(70)  Having conducted this re-examination, the Commission has determined that there is no 
verified  information  on  the  record  regarding  these  matters.  The  Commission  has  not 
found any such benchmark as regards Hynix itself. The equity provided to Hynix was 
generally either provided by the GOK or by banks that were entrusted or directed by 
the GOK. 

(71)  Moreover, no other comparable commercial benchmark was actually available in the 
market.  On  the  contrary,  the  available  information  indicated  Hynix  would  not  have 
obtained  the  relevant  funds  in  the  market.  As  noted  in  recital  (103)  of  the  definitive 
Regulation, in October 2001, Hynix’s credit rating from Standard & Poor’s was “SD” 
(selective  default).  Hynix  went  into  default  of  interest  payments  on  the  Syndicated 
Loan  in  May  2001  and  several  creditor  banks  raised  their  loan-loss  provisions  as 
regards Hynix already in May 2001 and again in October 2001, before the measures 
under consideration were put in place. The six banks concerned by the October 2001 
measures rated Hynix internally from “precautionary” to “doubtful” and the Option 2 
banks  involved  in  the  debt-to-equity  swap  were  given  very  little  choice:  they  either 
took  the  shares  or  they  effectively  wrote  off  Hynix’s  debts  completely.  The  GOK 
suggestion that the difference between the swap price paid and the market price should 
serve  as  the  amount  of  benefit  ignores  the  realities  of  Hynix’s  abysmal  financial 
situation;  no-one  would  invest  in  a  company  with  an  SD  rating.  The  conclusions  set 
out in recitals (101) through (112) of the definitive Regulation supporting the finding 
that no comparable equity financing that might serve as a benchmark was available to 
Hynix on the commercial market are hereby confirmed. 

(72)  The  Commission  would  therefore  be  in  a  position  to  reasonably  and  objectively 
conclude that no alternative commercial benchmark would actually be available in this 
case. Accordingly, under these circumstances, the Commission finds that the amount 
of  the  benefit  to  Hynix  could  not  exceed  the  full  amount  of  the  funds  obtained  by 
Hynix  as  a  result  of  the  operation  of  the  debt  to  equity  swap  in  the  October  2001 
Restructuring  Programme.  The  Commission  believes  that  this  conclusion  is  fully 
supported  by  its  (unchanged)  determinations  regarding  the  financial  situation  and 
worth of Hynix, and the situation in the DRAMs market and the financial markets, and 
that it is consistent with the basic Regulation and the Guidelines. 

EN 

25 

   EN 

 
(73)  However, mindful of the WTO Panel’s reasoning, the Commission has also considered 
whether  or  not,  even  absent  any  relevant  benchmarks,  there  is  any  other  method  by 
which the amount of the benefit might be adjusted to take into account the particular 
circumstances  of  this  case.  The  Commission  considers  that  the  uncreditworthy 
analysis  conducted  with  respect  to  debt  cannot  provide  an  appropriate  basis  for 
comparison, precisely because this particular financial contribution is concerned with 
equity, which is a fundamentally different type of measure from debt. 

(74)  The  Commission  has  taken  into  consideration  the  possibility  that,  in  the  particular 
circumstances  of  the  present  reassessment,  the  cost  to  the  recipient  of  receiving  the 
financial  contribution  should  be  taken  into  account.  The  Commission  notes  that,  in 
order to examine the cost, if any, of the swap from the point of view of the recipient, 
the  obligations  imposed  on  a  company  when  issuing  new  equity  would  have  to  be 
considered.  The  Commission  notes  in  this  respect  that  injections  of  ordinary  share 
capital do not generally impose particular obligations on a company, as there is neither 
a fixed rate of return which the company must achieve nor, in fact, do any payments 
need  to  be  made.  However,  the  company  has  at  least  a  theoretical  obligation  to 
distribute  its  profits  or  part  thereof  to  its  shareholders;  the  return  on  equity  ratio 
(‘ROE’) could provide some indication of the level of return the company is expected 
to provide to its shareholders and could be used in the calculation of the amount of the 
benefit  to  Hynix.  However,  the  ROE  of  Hynix  for  2001  was  minus  96,75%,  as 
calculated by reference to its financial statements for the year. Therefore, on the basis 
of  an  objective  evaluation  of  Hynix’s  financial  standing  at  the  time  of  the  debt-to-
equity  swap,  it  is  unreasonable  to  expect  that  Hynix  would  be  in  a  position  to 
distribute any sort of return to its shareholders for the relevant year. Hence, using the 
ROE as a benchmark, it would still be concluded that the entire amount of the debt-to-
equity swap is a countervailable subsidy. 

(75)  The Commission has also examined whether there are costs to Hynix associated with 
having to surrender ownership shares as a result of the swap or the cost to Hynix from 
potential dilution of the share price resulting from the issuance of new shares.60 Based 
on  its  review  of  the  record  evidence,  the  Commission  does  not  believe  that  the  net 
benefit  to  Hynix  of  the  full  debt-to-equity  swap  is  diminished  as  a  result  of  the 
issuance  of  new  shares.  In  this  regard,  the  Commission  believes  it  is  essential  to 
recognize the impact that the debt-to-equity swap had on Hynix’s financial situation. 

(76)  As a threshold matter, it is key to recognize that this was not a straight equity infusion. 
The fundamental benefit to Hynix resulted from the massive amount of debt that was 
extinguished  as  a  result  of  the  swap,  namely  KRW  2,483  billion.  This  effectively 
absolved Hynix from having to repay any of this principal amount and from having to 
pay  interest.  Instead,  this  massive  amount  of  debt  was  replaced  with  equity  shares 
issued to the Option 1 creditor banks. However, there was no real quantifiable cost to 
Hynix  of  issuing  the  new  shares.  While  the  existing  share  values  were  diluted  as  a 
result of the issuance, this had absolutely no balance sheet impact on Hynix. It did not 
result in any cash outlays (apart from the expense associated with the issuance of the 

60 

See Panel report at paras. 7.212 and 7.213 which discuss the Panel’s opinion that the full amount of the 
debt-to-equity  swap  may  not  reflect  the  full  amount  swapped  because  of  the  obligation  placed  on 
Hynix,  in  the  form  of  surrendering  ownership  shares  or  in  dilution  of  the  shares  to  existing 
shareholders.  

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26 

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new shares) and did not obligate Hynix to any sort of cash payments in the future, as 
would have been the case with debt instruments. 

(77)  Consequently, in light of all these considerations and since Hynix did not report any 
costs  associated  with  the  issuance  of  equity,  we  believe  the  appropriate  approach  to 
measuring  the  benefit  from  the  debt-to-equity  swap  is  to  take  the  full  amount  of  the 
swap.  This  results  in  an  overall  benefit  to  Hynix  of  358,2  billion  KRW  and  a 
countervailable subsidy allocated on turnover of 9,6%. 

ii.  Debt Rollover and New Loan 

(78)  The  Commission  considers  that  the  debt  rollover  and  new  loan  in  the  October  2001 
Restructuring  Programme may  be considered in the light of Article 6(b) of  the  basic 
Regulation  (which  generally  corresponds  to  Article  14(b)  of  the  SCM  Agreement), 
which  refers  to  the  amount  which  the  firm  would  pay  on  a  comparable  commercial 
loan that the firm could actually obtain on the market. 

(79)  The Commission has re-examined the record to consider whether there is any relevant 
benchmark against which the amount of the benefit could be calculated. It has looked 
for verified evidence about a comparable commercial loan that Hynix or another firm 
in  a  situation  comparable  to  Hynix  concluded  at  the  relevant  time.  A  comparable 
commercial loan ideally would be one of approximately the same size, would relate to 
the same or a similar sector of economic activity, would involve a comparable type of 
activity, and would have been concluded at approximately the same time. It could not 
involve  any  government  guarantee,  express  or  implied,  and  would  need  to  involve  a 
firm in a comparable financial situation to that of Hynix.  

(80)  The bonds purchased as part of the May 2001 Restructuring Programme cannot serve 
as a basis for determining the commercial reasonableness of the new loan and the debt 
rollover,  as  Hynix’s  financial  situation  deteriorated  substantially  between  May  and 
October 2001. Therefore, the two situations cannot be considered to be comparable.  

(81)  Having conducted this re-examination, the Commission has determined that there is no 
verified  information  on  the  record  regarding  these  matters.  The  Commission  has  not 
found any such benchmark as regards Hynix itself. The loans provided to Hynix were 
generally either provided by the GOK or by banks that were entrusted or directed by 
the GOK.  

(82)  As  already  indicated  above,61  no  other  comparable  commercial  benchmark  was 
actually  available  in  the  market.  On  the  contrary,  the  available  information  indicates 
Hynix could not have obtained the relevant funds in the market.  

(83)  The  Commission  would  therefore  be  in  a  position  to  reasonably  and  objectively 
conclude that no alternative commercial benchmark would actually be available in this 
case. Accordingly, under these circumstances, the Commission finds that the amount 
of  the  benefit  to  Hynix  could  not  exceed  the  full  amount  of  the  funds  obtained  by 
Hynix  as  a  result  of  the  operation  of  the  debt  rollover  and  new  loan  in  the  October 
2001 Restructuring Programme. The Commission believes that this conclusion is fully 

61 

Recitals (17) to (22), (57) to (59). 

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27 

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supported  by  its  (unchanged)  determinations  regarding  the  financial  situation  and 
worth of Hynix, and the situation in the DRAMs market and the financial markets, and 
that it is consistent with the basic Regulation and the Guidelines.  

(84)  However, mindful of the WTO Panel’s reasoning, the Commission has also considered 
whether  or  not,  even  absent  any  relevant  benchmarks,  there  is  any  other  method  by 
which the amount of the benefit might be adjusted to take into account the particular 
circumstances of this case. In this respect, the same methodology as the one outlined 
in recitals (45) and  (46) was  used to calculate the amount  of the benefit received by 
Hynix from these two measures.  

(85)  For the purposes of this calculation, the Commission has used as the creditworthy rate 
for KRW loans the average Bank of Korea interest rate on investment grade corporate 
bonds  in  2001,  which  was  11,38%.  The  default  rates  for  both  creditworthy  and 
uncreditworthy  companies  for  the  term  of  the  measures  in  question  was  taken  from 
Moody’s Investor Services. The rate of default of an uncreditworthy company in 2001 
within 3 years (the term of the new loan and of the roll-over) was 57,97%, whereas the 
rate of default of a creditworthy company within three years in 2001 was 0,94%. This 
led to a total interest rate of 48,22%. In contrast, the interest rate payable by Hynix on 
the  new  loan  was  7%  and  on  the  roll-over  6,5%,  i.e.,  an  interest  rate  differential  of 
41,2% and 41,7% respectively. 

(86)  Viewing the financial contributions as recurring subsidies, rather than as non-recurring 
subsidies to be allocated over time, and applying this model to the calculation of the 
amount of the benefit in the financial contributions under consideration, would lead to 
an amount of benefit of KRW 271,5 billion for the new loan and KRW 761,4 billion 
for the roll-over. This would result in countervailable subsidies allocated on turnover 
of  6,8%  for  the  new  loan  and  19,1%  for  the  roll-over,  compared  to  3,5%  and  9,8% 
respectively,  as  originally  calculated  by 
the 
Commission considers that its original approach was and is reasonable in this case, as 
the interest rate differential would give a much higher amount of benefit than a simple 
allocation  of  the  face  amount  of  the  loans  over  time.  In  these  circumstances,  the 
Commission has used the more conservative of the two options in order to be sure that 
it has not exaggerated the amount of the subsidy and will treat the face amount of the 
loans  as  the  basis  for  a  cap  on  the  maximum  amount  of  the  benefit.  On  the  basis  of 
these considerations, the Commission had determined that the amount of the benefit to 
Hynix ad valorem of turnover is, for both measures, 13,3%. 

the  Commission.  Consequently, 

(87) 

It  is  noted  that,  in  relation  to  the  Debt  Rollover,  contrary  to  recital  (166)  of  the 
definitive Regulation, the amount of CBs purchased by Option 1 banks has not been 
deducted, as the May 2001 measures are no longer countervailed. 

iii.  Total subsidy of October 2001 Rescue Package 

(88)  The  subsidy  amount  thus  calculated  for  the  Debt  to  Equity  Swap,  the  Debt  Rollover 
and  the  New  Loan  was  considered  to  confer  a  large  non-recurring  benefit  and  was 
spread  across  a  five-year  period  corresponding  to  the  normal  depreciation  period  of 
assets  in  the  DRAMs  industry.  The  resulting  amount  was  then  allocated  on  Hynix’s 
turnover during the IP and interest based on the average commercial rate applicable in 
Korea during the IP was added. The revised amount expressed ad valorem is 22,9%. 

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1.8.  Total Subsidy Amount 

(89) 

In summary, the calculation of the total amount of the subsidy has thus been revised 
follows:  
on 

recommendations  and 

the  basis  of 

is  now  as 

the  Panel’s 

Type  of 
Subsidy 

D/A 
Extension 

KDB 
Debenture 
Programme 

May  2001  CB 
Purchase, Dept 
Roll-over 

October  2001 
Rescue 
Package 

TOTAL 

– 5,1% 

4,9% 

0% 

22,9% 

32,9% 

2. 

Injury 

2.1.  Introduction 

(90)  This part  sets out the reassessed findings  based on the recommendation of the Panel 
report concerning the evaluation of the factor “wages” as a relevant factor affecting the 
state  of  the  Community  industry  within  the  meaning  of  Article  8(5)  of  the  basic 
Regulation (which generally corresponds to Article 15.4 of the SCM Agreement). 

(91)  All other findings concerning injury remain as established in the original investigation 

and set out in the provisional Regulation and the definitive Regulation. 

2.2.  Wages 

(92) 

In the original investigation the EC had considered and evaluated the wages factor, but 
found  wages  to  be  irrelevant  to  its  injury  determination.  However,  the  Panel  found 
that: 

“without  a  written  record  of  the  analytical  process  undertaken  by  the  investigating 
authority to evaluate “wages”, we cannot examine whether an adequate and reasoned 
explanation  has  been  provided  of  how  the  facts  support  the  injury  determination 
made by the EC and, consequently, whether that determination was consistent with 
Article 15.4. Without that written record, we would be forced to embark on post hoc 
speculation about the thought process by which the investigating authority arrived at 
its ultimate conclusions. We consider that the standard of review in Article 11 of the 
DSU prevents us from embarking upon this exercise.”62 

Consequently, the Panel concluded that the EC acted inconsistently with Article 15.4 
of  the  SCM  Agreement  in  not  evaluating  the  “wages”  factor  when  examining  the 
impact of the subsidized imports on the state of the domestic industry.63  

(93) 

In  the  light  of  the  Panel’s  finding,  the  Commission,  having  again  reviewed  the 
information  on  the  record  concerning  Community  wages,  both  in  isolation  and 
together  with  the  other  injury  factors  set  out  in  Article  8(5)  of  the  basic  Regulation, 
provides herein a written record of its evaluation of the wages factor. 

62 
63 

Panel report, para. 7.360. 
Panel report, para. 7.362. 

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(94)  The  Commission  examined  the  average  cost  of  wages  per  employee  for  the 
Community industry during the IP, and in the three prior years. The indexed results are 
shown in the following table.64 

Average cost for wages per employee 1998 

1999 

2000 

2001 (IP) 

Index 

100 

99 

115 

109 

(95)  The  table  shows  that  the  average  cost  of  the  Community  industry  for  wages  and 
salaries during the period under consideration varied, decreasing and increasing over 
time.  In  the  year  2000,  it  increased  by  15%.  In  2001,  compared  to  1998,  it  had 
increased by 9%. Overall, the increase was lower than the increase of the total hourly 
labour  costs  in  the  euro  area  during  this  period.65  Thus,  there  were  no  unusual 
developments  in  wages  during  the  relevant  period,  and  any  developments  only  had 
very limited effects on the financial situation of the domestic industry as a whole.66  

(96)  Furthermore, the Commission recalls that DRAMs are capital intensive products and, 
thus, labour may only have a limited contribution to their cost of production (see also 
recital  (41)  above).  Consequently,  this  relatively  small  increase  in  wages  had  hardly 
any effect on the overall financial situation of the Community industry. 

(97)  Given its negligible impact, consideration of the wages factor together with the other 
factors referred to in Article 8(5) of the basic Regulation ) is not such as to alter the 
conclusion that the Community industry suffered material injury.67  

2.3.  Conclusion 

(98)  Based  on  the  foregoing,  the  conclusion  set  out  in  recital  (188)  of  the  definitive 
Regulation  that the Community  industry  suffered  material  injury  within  the  meaning 
of Article 8 of the basic Regulation is hereby confirmed. 

64 

65 

66 

67 

Data obtained from the confidential version of the questionnaire responses and the financial statements 
of the Community producers. 
The  total  hourly  labour  costs  in  the  euro  area  for  the  whole  economy  (excluding  agriculture,  public 
administration, education, health and other services) increased between 1998 and 2001 by 10,5% (see 
ECB Monthly Bulletin for December 2001 and May 2002). 
However,  there  were  adverse  wage  and  benefit  effects  suffered  by  at  least  one  Community  DRAM 
manufacturer,  Micron,  due  to  financial  losses  caused  by  substantial  volumes  of  subsidised  Hynix 
imports  sold  at  prices  that  caused  substantial  DRAM  price  depression.  In  October  2001,  Micron 
suspended  all  wage  and  cost-of-living  increases.  In  addition,  Micron  executives  took  a  20  percent 
reduction  in  pay.  Micron’s  employee  profit  sharing  program,  whereby  10  percent  of  each  quarterly 
profit is shared with Micron employees, was suspended, and senior staff took a 10 percent reduction in 
pay.  In  addition,  in  December  2001  all  employees  were  placed  on  mandatory  leave  for  two  to  three 
weeks which, for employees who had already exhausted their annual vacation allowance, was unpaid. 
Micron  post-hearing  submission,  18  February  2003,  at  p.  62.  In  addition  to  these  wage  and  benefit 
reductions,  in  February  2003  Micron  was  compelled  to  lay  off  ten  percent  (more  than  1850)  of  its 
company-wide  workforce  (id.),  and  Infineon  “was  obliged  to  reduce  the  number  of  employees  in  the 
fourth quarter of 2001 as a result of the losses related to subsidized imports from Korea.” Infineon post-
hearing submission, 14 March 2003, at p. 36. 
Article 8(5) of the basic Regulation states that “[t]his list [of relevant economic factors having a bearing 
on the state of the industry] is not exhaustive, nor can one or several of these factors necessarily give 
decisive guidance.”  

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30 

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3.  Causation 

3.1.  Introduction 

(99)  This part sets out the reassessed findings based on the recommendations of the Panel 
report concerning the non-attribution to the subsidized imports of any injury caused by 
other factors (in particular, decline in demand, overcapacity and other, non-subsidized 
imports)  within  the  meaning  of  Article  8(7)  of  the  basic  Regulation.  The  Panel’s 
determination  in  paragraph  7.437  of  its  report  does  not  preclude  a  conclusion  of  a 
causal relationship between subsidized imports and the material injury suffered by the 
Community industry, but added that a satisfactory explanation of the nature and extent 
of the injurious effects of those other factors, preferably with quantitative analysis, as 
distinguished from the effects of the subsidized imports, is required. 

3.2.  Decline (contraction) in demand and economic downturn 

(100)  Article  8(7)  of  the  basic  Regulation  (which  generally  corresponds  to  Article  15.5  of 
the SCM Agreement) requires examination of any known factors other than subsidized 
imports  which  at  the  same  time  are  injuring  the  Community  industry,  and  not  to 
attribute injury caused by these other factors to subsidized imports. One of the factors 
referred to is “contraction in demand”. 

(101)  The Panel found at paragraph 8.1(e) of its report that the EC had failed to make sure 
that  the  injury  caused  by  “decline  in  demand”  was  not  attributed  to  the  subsidized 
imports. This conclusion was reached in the light of the Panel’s findings at paras 7.411 
to  7.414  of  its  report,  which  treat  a  “decline  in  demand”  as  synonymous  with  a 
“general economic downturn”.  

EC Consumption 

1998 

1999 

2000 

2001 (IP) 

DRAMs in ‘000 Mbits 

16.593.400

28.961.100

45.873.600 

68.967.600

Index 

100

175

276 

416

(102)  The  Commission  recalls  that,  all  other  things  being  equal,  demand  (i.e.,  the 
willingness  and  ability  to  obtain  an  amount  of  a  particular  good)  may  generally  be 
considered to be equivalent to consumption (i.e., the actual physical process of using a 
good  irrespective  of  the  level  of  trade).  The  above  table  sets  out  EC  consumption 
during the relevant period in terms of Mbits. The use of this unit of measurement was 
not disputed before the Panel. It appears from the above table that because the actual 
consumption  in  the  Community  for  DRAMs  increased  constantly  and  significantly 
during the period under consideration, it is incorrect to allege that the level of demand 
for  DRAMs  in  the  Community  declined  during  the  same  period.  Thus,  all  of  the 
relevant  argumentation  concerning  the  impact  of  the  “decline  in  demand”  on  the 
injurious  situation  of  the  Community  industry  (in  particular  its  prices)  raised  by  the 
GOK and Hynix is irrelevant, because, as shown above, the level of demand increased. 
With respect to the claim by the GOK and Hynix that the alleged decline in demand 
affected  the  Community  industry’s  prices,  this  is  unfounded  in  light  of  the  fact  that 
there was no decline in the level of demand. On the contrary, the subsidized imports 
had  a  significant  impact  on  the  prices  of  the  Community  industry  and,  thus,  on  its 
injurious condition (see recitals (191) and (192) of the definitive Regulation). 

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31 

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(103)  Hynix and the GOK noted that worldwide demand for DRAMs grew in 2001 by only 
59% compared to the average year on year growth rate of 75%, apparently contending 
that  in  2000-2001  there  was  a  huge  slowdown  in  the  growth  rate  of  demand  (see 
recital (193) of the definitive Regulation). The Commission does not agree. Hynix and 
the GOK correctly point out that the DRAMs market is cyclical (see recital (193) of 
the  definitive  Regulation).  However,  in  cyclical  markets,  demand  growth  rates  vary 
sharply from one year to another, and it would be unreasonable to expect the growth 
rate of demand in a particular year to reflect the average growth rate of demand for an 
entire  business  cycle.  A  reasonable  way  to  assess  whether  demand  growth  slowed 
significantly  in  2000-2001,  taking  into  account  the  cyclical  nature  of  the  market, 
would be to compare the growth rate of demand in 2000-2001, which was a cyclical 
trough, with the average growth of demand during troughs in previous cycles. Neither 
Hynix nor the GOK made any arguments nor submitted any data in support of such a 
comparison.  Accordingly,  record  evidence  does  not  support  the  conclusion  that  in 
2000-2001  the  growth  rate  of  demand  slowed  down  significantly,  considering  the 
cyclical nature of the DRAMs market.  

(104)  It was also considered whether the growth rate of demand in the Community slowed 
down in 2000-2001 as compared to the actual growth rates observed in previous years. 
The  demand  for  DRAMs  in  the  Community,  measured in terms of EC  consumption, 
increased  by  75%  in  1998-1999,  58%  in  1999-2000  and  51%  in  2000-2001.  Thus, 
while there was a constant increase in demand during the period under consideration, 
this increase followed a declining trend. Nevertheless, demand growth rate remained 
significant in the IP (51%).  

(105)  The declining trend in demand growth was more pronounced between 1999 and 2000 
(where demand growth declined by 17 percentage points) than between 2000 and the 
IP (where demand growth declined by 8 percentage points). This evolution of demand 
growth has to be assessed by comparison with the evolution of the sales prices of the 
Community  industry,  the  primary  cause  of  injury  to  the  Community  industry  during 
the  period  under  consideration  (see  recital  (188)  of  the  definitive  Regulation).  In 
particular, in 1999-2000, demand growth declined by a sizable 23%, but the average 
sales price of the Community industry dropped by only 5%. Conversely, between 2000 
and the IP demand growth declined moderately by 12%, but the average sales price of 
the Community industry plummeted by 77% (see recital (128) and the relevant table of 
the provisional Regulation). If slowing demand growth had been a cause of injury, one 
would  have  expected  the  sales  prices  of  the  Community  industry  to  decline  more 
sharply  in  the  period  when  demand  growth  declined  more  steeply.  Record  evidence 
shows no such relationship between trends in demand growth and trends in the sales 
prices of the Community industry. It is therefore concluded that there is no apparent 
link  between  demand  growth  and  the  sales  prices  of  the  Community  industry  which 
could  indicate  that  slowing  demand  growth  contributed  to  the  injury  suffered  by  the 
Community industry. 

(106)  This  approach  is  consistent  with  the  findings  of  recent  WTO  panels  reviewing 
determinations  in  respect  of  non-attribution.  In  particular,  WTO  panels  have  upheld 
non-attribution findings where record evidence showed that the factor concerned could 
not have caused injury because trends in such factor were independent from trends in 
key indicators of the domestic industry. Specifically, in US-Steel, the Panel noted that 
the  facts  appeared  to  support  the  investigating  authority’s  finding,  in  respect  of  hot-
rolled bar, that cost increases had not caused injury because trends in operating margin 

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32 

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(a  key  measure  of  profitability)  were  unrelated  to  trends  in  the  Cost  of  Goods  Sold 
(‘COGS’).68  Similarly,  while  the  Panel  concluded  that  the  investigating  authority’s 
finding, in respect of stainless steel bar, concerning demand as a factor of injury, did 
not  satisfy  the  non-attribution  requirement,  the  Panel  noted  that  the  investigating 
authority  could  have  met  this  requirement,  through  a  “reasoned  and  adequate 
explanation”, simply by showing that trends in demand had no connection with trends 
in a key variable attesting to the condition of the domestic industry.69 

(107)  Accordingly, the Commission is of the view that its re-determination satisfies the non-
attribution  requirement  under  Article  8(7)  of  the  basic  Regulation  (which  generally 
corresponds to  Article  15.5 of the  SCM Agreement) in respect of demand growth by 
showing  that,  during  the  period  under  consideration,  trends  in  demand  growth  were 
independent  from  trends  in  the  sales  prices  of  the  Community  industry.  The 
Commission  is  also  of  the  view  that  its  re-determination  satisfies  the  non-attribution 
requirement in respect of declines in the level of demand by showing that during the 
period under consideration no such demand declines took place.  

3.3.  Overcapacity 

(108)  The  Panel  noted  in  paragraph  7.421  of  its  report  that  the  question  of  separating  and 
distinguishing the effects of overcapacity in driving prices down should be addressed, 
irrespective of who is to blame for such overcapacity. 

(109)  The Commission notes that “overcapacity” is not expressly referred to in Article 8(7) 
of  the  basic  Regulation  (which  generally  corresponds  to  Article  15.5  of  the  SCM 
Agreement).  The  concept  is  discussed  in  the  provisional  and  definitive  Regulations 
insofar  as  it  is  invoked  by  certain  of  the  interested  parties.  It  is  a  relative  concept, 
insofar  as  it  depends  on  how  much  capacity  is  available  and  how  much  capacity  is 
being  used  –  that  is,  on  the  level  of  demand.  “Overcapacity”  may  thus  arise  either 
because capacity is increased, or demand falls.  

68 

69 

“[T]he  Panel  does  consider  that  the  USITC  was  probably  correct  in  concluding  that  changes  in  input 
costs were not a cause of serious injury. If, indeed, COGS played a significant role in [the] situation of 
the  domestic  industry,  one  would  have  expected  operating  profits  to  increase  while  COGS  was 
decreasing … However, as can be seen from the graph below, which has been generated using USITC 
data, the trends in operating margin appear to be independent of trends in COGS.” Report of the Panel, 
United  States  -  Definitive  Safeguard  Measures  on  Imports  of  Certain  Steel  Products,  WT/DS248/R, 
WT/DS249/R,  WT/DS251/R,  WT/DS252/R,  WT/DS253/R,  WT/DS254/R,  WT/DS258/R, 
WT/DS259/R,  adopted  December  10,  2003,  as  modified  by  the  Appellate  Body  report  (on  other 
grounds), paras. 10.440 and 10.443. 
In  particular,  the  Panel  stated:  “While…reluctant  to  prescribe  what  may  amount  to  a  reasoned  and 
adequate explanation, the Panel considers that the USITC could have, for example, demonstrated that 
there was no linkage between demand declines during the period of investigation and injury suffered in 
this particular case. More particularly, the USITC could have explained that operating margin, perhaps 
the  most  relevant  injury  factor  in  this  regard,  declined  irrespective  of  demand  trends.  This  analysis 
could have been bolstered by an explanation that declines in operating margin coincided with increases 
in  imports  rather  than  declines  in  demand”  (emphasis  added).  Report  of  the  Panel,  United  States  - 
Definitive  Safeguard  Measures  on  Imports  of  Certain  Steel  Products,  WT/DS248/R,  WT/DS249/R, 
WT/DS251/R,  WT/DS252/R,  WT/DS253/R,  WT/DS254/R,  WT/DS258/R,  WT/DS259/R,  adopted 
December 10, 2003, as modified by the Appellate Body report (on other grounds), para.10.558. 

EN 

33 

   EN 

 
                                                 
(110)  “Overcapacity”  as  a  possible  factor  of  injury  can  be  examined  in  the  context  of  the 
world market or in the context of the Community market. The Commission considers 
both situations below. 

(111)  As  set  out  in  recital  (153)  of  the  provisional  Regulation  and  recital  (197)  of  the 
definitive Regulation, some overcapacity existed worldwide during a number of years 
including  the  period  under  consideration.  No  major  change  in  this  overcapacity 
situation has been observed during the period under consideration and in particular at 
the  end  of  this  period  leading  to  the  IP.  This  worldwide  overcapacity  may  have 
asserted  pressure  on  prices  during  the  period  under  consideration,  which  may  have 
contributed  to  the  injury  suffered  by  the  Community  industry.  This  finding  has  not 
been disputed by any party concerned. 

(112)  However,  as  set  out  in  recital  (147)  of  the  provisional  Regulation,  the  worldwide 
overcapacity was estimated to be approximately 20% of the market. Hynix accounted 
for around 17% of worldwide production during the IP. Given that Hynix was virtually 
bankrupt during the IP and remained afloat only through the subsidies provided by the 
GOK,  it  can  be  concluded  that  the  worldwide  overcapacity  situation  has  been 
artificially  maintained  through  the  subsidization  of  Hynix.  Thus,  the  effect  of 
worldwide  overcapacity  on  the  injurious  situation  of  the  Community  industry  was 
channelled  through  Hynix’s  subsidised  imports.  This  effect  has  been  analysed  in 
recitals (144) to (149) of the provisional Regulation and recitals (191) and (192) of the 
definitive Regulation. In this respect, the effect of worldwide overcapacity created by 
Hynix  cannot  be  considered  as  a  factor  separate  from  the  effects  of  the  subsidized 
imports. 

(113)  In  any  event,  even  if  the  effect  of  worldwide  overcapacity  could  be  considered 
separately  from  the  effect  of  subsidized  imports,  the  following  can  be  observed. 
Information  from  the  questionnaire  responses  of  the  four  producers  of  DRAMs  co-
operating with the original investigation (i.e., Samsung, Hynix, Infineon and Micron, 
which together represented around 80% of the worldwide DRAMs market) shows that 
their total capacity in Mbits increased by 129% between 1999 and 2000 and by 85% 
between  2000  and  the  IP.  Their  total  production  in  Mbits  increased  in  line  by  124% 
between  1999  and  2000  and  by  81%  between  2000  and  the  IP.  In  other  words,  the 
capacity  and  the  production  of  the  four  major  worldwide  producers  increased 
significantly  more  between  1999  and  2000,  the  good  year  during  which  the 
Community industry maintained  some price stability and made profits, than between 
2000  and  the  IP  (2001),  during  which  the  Community  industry  suffered  significant 
losses because of the collapse of prices (see recitals (128), (131) and relevant tables of 
the  provisional  Regulation).  Consequently,  the  existing  worldwide  overcapacity 
throughout  the  period  under  consideration  did  not,  in  the  Commission’s  view, 
contribute significantly to the collapse of prices and the material injury suffered by the 
Community industry in the IP. 

(114)  In addition, record evidence shows that Community overcapacity was not a factor of 
injury.  During  1999-2000,  Community  capacity  more  than  tripled  (increasing  by 
252%), and from 2000 to 2001 it nearly doubled (increasing by 92%). These additions 
to  Community  capacity  were  accompanied  by  increases  in  Community  production. 
While capacity utilization in the Community did drop by 28% from 1999 to 2000, it 
recovered  by  4%  from  2000  to  2001  (see  recital  (125)  and  relevant  table  of  the 
provisional Regulation). 

EN 

34 

   EN 

 
(115)  Trends  in  Community  overcapacity  (defined  as  the  inverse  of  Community  capacity 
utilization)  show  little  or  no  correlation  with  trends  in  the  sales  prices  of  the 
Community  industry.  In  particular,  during  1999-2000,  Community  overcapacity  rose 
by 28%, but the sales prices of the Community industry fell by only 5%. Further, from 
2000 to 2001, Community overcapacity went down by 4% but the sales prices of the 
Community industry plummeted by 77% (see recitals (125), (128) and relevant tables 
of  the  provisional  Regulation).  It  may  be  concluded  that,  if  rising  overcapacity  were 
correlated  to  falling  price  levels,  the  significant  increase  in  overcapacity  over  1999-
2000  would  have  resulted  in  severe  price  depression,  whereas  the  contraction  in 
overcapacity in 2000-2001 would have led to rising prices, or at least to some degree 
of  price  stability.  Record  evidence  shows  the  opposite.  Over  1999-2000,  there  was 
very mild price depression, despite the significant increase in overcapacity, while from 
2000  to  2001,  there  was  substantial  price  depression,  despite  the  contraction  in 
overcapacity. This stands in sharp contrast with the close correlation between trends in 
the prices of the subsidized imports and trends in the sales prices of the Community 
industry.  In  fact,  during  2000-2001  the  trend  in  the  sales  prices  of  the  Community 
industry  mirrored  almost  perfectly  the  trend  in  the  prices  of  the  subsidized  imports: 
over this period, the former dropped by 74% and the latter did so by 77% (see recitals 
(119) and (128) of the provisional Regulation). 

(116)  Record  evidence  also  shows  that  trends  in  Community  overcapacity  bear  no 
correlation  with  trends  in  other  key  indicators  of  the  condition  of  the  Community 
industry. In particular, during 1999-2000, the profitability of the Community industry 
was  rising,  and  returns  on  investment  and  cash  flow  were  positive,  in  spite  of  the 
significant increase in Community overcapacity. In contrast, in 2001 the Community 
industry suffered heavy losses, and returns on investment and cash flow were negative, 
in  spite  of  the  contraction  in  Community  overcapacity  during  2000-2001.  The 
performance  of  the  Community  industry  over  2000-2001  in  terms  of  profitability, 
returns on investment and cash flow is correlated instead with the trend in the prices of 
the  subsidized  imports  over  that  period.  As  noted,  in  2000-2001,  as  the  Community 
industry  suffered  heavy  losses  and  negative  cash  flow  and  return  on  investment,  the 
prices of the subsidized imports decreased by 74%.  

industry.  The  Commission 

(117)  Hynix claimed that Community overcapacity was another known factor contributing to 
material injury during the period under consideration. However, trends in Community 
overcapacity show no or only negligible correlation with trends in the condition of the 
Community 
that  Community 
overcapacity  cannot  be  considered  as  a  factor  of  material  injury  to  the  Community 
industry. Given that Community overcapacity did not adversely affect the condition of 
the Community industry, there is no need to distinguish any alleged injury caused by 
capacity  from  the  injury  caused  by  Hynix’s  imports.  The  Commission  believes  this 
finding is consistent with the findings of recent WTO panels reviewing determinations 
in respect of non-attribution described in recital (106) above. 

therefore  concludes 

(118)  As  reviewed,  there  is  no  demonstrated  causal  relationship  between  overcapacity  and 
either price declines or injury to the Community industry. In contrast, the Community 
industry suffered severe declines during 2001, which is the same period when subject 
import prices plummeted and when subject import volumes reached peak penetration 
in  the  Community  market.  This  contrast  establishes  that  subject  import  volumes  and 
price  effects  are  a  separate  and  distinguishable  cause  of  material  injury  to  the 
Community industry as compared with overcapacity. 

EN 

35 

   EN 

 
3.4.  Other non-subsidized imports 

(119)  The  Panel  noted  in  paragraph  7.426  of  its  report  that  there  is  no  requirement  to 
consider non-subsidized imports on a country-per-country basis. The Panel also noted 
in  paragraph  7.435  that  a  satisfactory  explanation  of  the  nature  and  extent  of  the 
injurious effects of non-subsidized imports, as distinguished from the injurious effects 
of  the  subsidized  imports,  should  be  provided.  Accordingly,  the  effects  of  non-
subsidized imports were examined by considering jointly imports from other countries 
than  Korea  (e.g.  the  United  States,  Japan,  and  Taiwan)  and  imports  from  Samsung. 
Recital  (151)  of  the  provisional  Regulation  and  recitals  (194)  and  (200)  of  the 
definitive  Regulation  provide  the  growth  rates  of  import  volume,  market  share,  and 
average prices of non-subsidised imports during the period under consideration. These 
data are re-stated below in aggregated index form.70 Given the very limited number of 
players in the DRAMs market, for reasons of confidentiality, indices are used to show 
the evolution of trends. 

1998 

1999 

2000 

2001 (IP) 

Non-subsidized imports in ‘000 Mbits 

100 

142 

166 

233 

Market share of non-subsidized imports 

100 

Average price of non-subsidized imports 

100 

81 

89 

60 

104 

56 

48 

(120)  During the period under consideration, non-subsidized imports increased significantly 
less than did subsidized imports, i.e., by 133% as opposed to 361% (see recital (177) 
and relevant table of the definitive Regulation). It is noted that during the same period 
Community  consumption  increased  by  316%.  Hence,  whereas  the  rate  of  growth  in 
non-subsidized  imports  was  only  a  fraction  of  the  rate  of  growth  of  Community 
consumption,  subsidized 
in  excess  of  Community 
consumption. Accordingly, during the period under consideration, the market share of 
non-subsidized  imports  contracted  by  44%  whilst  the  market  share  of  subsidized 
imports  expanded  by  20%  (see  recital  (185)  and  relevant  table  of  the  definitive 
Regulation). If the market share of non-subsidized imports heavily declined during the 
period under consideration, as shown by the above facts, it can be concluded that non-
subject  imports  did  not  injure  the  Community  industry  by  reason  of  their  volume 
effects.  

increased  well 

imports 

(121)  Record evidence also indicates that non-subject imports did not injure the Community 
industry  by  reason  of  their  price  effects.  During  the  IP,  the  prices  of  non-subsidized 
imports exceeded not only the prices of subsidized imports but also the sales prices of 
the  Community  industry.  In  particular,  during  the  IP  the  average  price  of  non-
subsidized imports was 19% higher than the average price of subsidized imports and 
24%  higher  than  the  average  sales  price  of  the  Community  industry.  In  addition, 
during  the  period  under  consideration,  the  prices  of  non-subsidized  imports  fell,  but 
not  anywhere  as  much  as  the  prices  of  subsidized  imports  and  the  Community 

70 

They derived from the confidential questionnaire responses of companies co-operating with the original 
investigation,  as  verified,  and  publicly  available  external  sources  like  Gartner  Dataquest  and  In-Stat 
MDR. 

EN 

36 

   EN 

 
 
                                                 
industry. In particular, during the period under consideration the average price of non-
subsidized imports decreased by 52%. In contrast, over such period, the average price 
of  subsidized  imports  decreased  by  80%  (see  recital  (178)  and  relevant  table  of 
definitive Regulation) and the average sales price of the Community industry by 79% 
(see  recital  (128)  and  relevant  table  of  the  provisional  Regulation).  On  the  basis  of 
these facts, it can be concluded that the prices of non-subsidized imports did not affect 
adversely the sales prices of the Community industry. 

(122)  As is the case with overcapacity, there is no demonstrated causal relationship between 
non-subject imports and price declines or injury to the Community industry. There is, 
at  the  same  time,  a  clear  deterioration  in  Community  industry  performance  while 
subject import volumes steadily increased and while subject import prices undercut the 
Community  like  product.  This  contrast  establishes  that  subject  import  volumes  and 
price  effects  are  a  separate  and  distinguishable  cause  of  material  injury  to  the 
Community industry as compared with non-subject imports. 

(123)  Therefore,  the  Commission  is  of  the  view  that  its  re-determination  satisfies  the  non-
attribution  requirement  under  Article  8(7)  of  the  basic  Regulation  (which  generally 
corresponds to Article 15.5 of the SCM Agreement) in respect of non-subject imports 
by  separating  and  distinguishing  this  other  factor  from  subsidized  imports  and 
showing that, during the period under consideration, non-subject imports did not cause 
material injury to the Community industry, either in terms of their volume effects or in 
terms of their price effects.  

3.5.  Conclusion 

(124)  Having  separated,  where  appropriate,  and  analysed  further  the  effects,  if  any,  of  the 
decline  in  demand,  overcapacity  and  other  non-subsidized  imports,  it  is  considered 
that  no  injury  caused  by  any  of  these  factors  has  been  attributed  to  the  subsidised 
imports within the meaning of Article 8(7) of the basic Regulation. Furthermore, it is 
confirmed  that  the  subsidized  imports  through  the  effects  set  out  in  recitals  (144)  to 
(149)  of  the  provisional  Regulation  and  recitals  (191)  and  (192)  of  the  definitive 
Regulation have caused material injury to the Community industry within the meaning 
of Article 8(6) of the basic Regulation. 

4.  Community interest 

(125)  The  contents  and  conclusions  reached  in  recitals  (206)  to  (209)  of  the  definitive 

Regulation remain unaffected by the Panel report. 

D. 

REVISED MEASURES 

(126)  The Panel report and the reassessed findings do not concern Samsung which was not 
found  to  be  subsidized  and  thus  was  attributed  a  0%  duty  rate  in  the  original 
investigation. The revised subsidy amount for Hynix was found to be lower than the 
injury  elimination  level  established  during  the  original  investigation  and,  thus,  the 
revised  countervailing  duty  rate  should  be  based  on  the  revised  subsidy  amount 
expressed ad valorem, i.e. 32,9%. 

EN 

37 

   EN 

 
(127)  It is noted that the revised duty rate for Hynix should apply on the duty as specified by 

Council Regulation (EC) No 2116/2005 amending Regulation (EC) No 1480/2003. 

(128)  The  GOK,  Hynix  and  the  Community  producers  Infineon  and  Micron  received 
disclosure of the reassessed findings and were given an opportunity to comment and to 
be heard. They each submitted comments.71 

(129)  The  GOK  generally  submits  that  the  revised  findings  do  not  reasonably  address  the 
Panel’s recommendations. The Commission does not agree, for the reasons set out in 
this Regulation. The Commission does not agree that the revised duty must necessarily 
be lower than the original duty; and notes that in any event it is. The GOK specifically 
submits that the Commission should have used seven banks in the Syndicated Loan as 
a benchmark. The Commission disagrees, particularly for the reasons set out in recitals 
(16) to (24) above. The GOK also submits that the Commission should have made its 
benchmark  calculations  differently.  In  the  light  of  the  GOK’s  comments  the 
Commission  has  made  some  adjustments  to  its  calculations,  as  reflected  in  this 
Regulation.  For  the  reasons  set  out  in  this  Regulation,  the  other  aspects  of  the 
calculations  remain  unchanged.  Finally,  the  GOK  submits  that  the  Commission’s 
injury  re-determination  does  not  separate  and  distinguish  the  effects  of  other  known 
factors, particularly with respect to economic downturn, overcapacity and other non-
subsidized imports. The Commission disagrees, particularly for the reasons set out in 
recitals (100) to (123) above. 

(130)  Hynix  aligns  itself  with  the  submissions  of  the  GOK,  discussed  in  the  preceding 
recital. In addition, Hynix submits that the period of time during which duties should 
be imposed should have been terminated on 1 January 2006. This is not a matter that 
was the subject of dispute or recommendations by the WTO Panel; and is not therefore 
part  of  the  “measure  taken  to  comply”  with  the  Panel’s  recommendations  which  is 
encapsulated  within  this  Regulation.  This  Regulation  does  not  alter  the  impending 
expiry  date  of  the  definitive  Regulation.  The  question  of  an  early  termination  of  the 
measure  rather  falls  within  the  ambit  of  an  eventual  interim  review,  not  within  the 
ambit of implementation of the Panel report. Hynix also submits that the revised rate 
of duty must apply retroactively from the date on which measures were first imposed. 
The Commission similarly considers that this issue is not part of the “measure taken to 
comply” and in any event does not agree. Nothing in the relevant legal rules obliges 
the  Commission  to  apply  the  revised  duty  retroactively,  the  Panel  limiting  itself  to 
recommending  that  the  measure  be  brought  in  conformity,  which  is  achieved  by  the 
present Regulation. 

(131)  Infineon  substantially  agrees  with  the  re-determination.  However,  it  submits  that  the 
Commission  should  impose  a  higher  duty  based  on  a  proxy  benchmark  and  the 
original injury determination, rather than the lower duty set out in this Regulation. The 
Commission has carefully considered that request. However, for the reasons set out in 
this  Regulation  and  due  to  the  specific  purpose  of  this  Regulation,  notably  as  an 
implementation  of  the  Panel’s  recommendations,  the  Commission  has  not  altered  its 
initial determination on this point. 

71 

GOK  letter  dated  13  February  2006;  Hynix  letter  dated  14  February  2006;  Infineon  letter  dated  13 
February 2006; Micron letter dated 13 February 2006, with exhibits 1 to 27, including an Expert Report 
from Professor J. Hausman dated 13 February 2006. 

EN 

38 

   EN 

 
                                                 
(132)  Micron also substantially agrees with the re-determination, referring in this respect to 
facts and evidence that tend to confirm and corroborate the Commission’s conclusions, 
including  an  Expert  Report  prepared  by  Professor  J.  Hausman.  Therefore,  Micron’s 
comments  do  not  necessitate  any  modification  of  those  conclusions  as  such.  Micron 
further  submits  that  the  Commission  should  re-affirm,  based  on  current  WTO 
precedent, that the GOK entrusted or directed the banks in the May 2001 Restructuring 
Programme  and  should  countervail  the  subsidies  provided  by  the  public  bodies.  The 
Commission has carefully considered this submission, which, in principle, has merit. 
However, as noted in this Regulation, the May 2001 Restructuring Programme would 
not  in  any  event  be  countervailed,  given  that  the  largest  proportion  of  the  benefit 
would have been accounted for in the October 2001 measures. Mainly for this reason, 
the  Commission  has  decided  not  to  return  to  these  issues  in  this  implementing 
Regulation.  

(133)  Thus, all comments submitted by the interested parties were considered and taken into 
account where appropriate. However, certain comments were outside the scope of this 
Regulation  which  is  only  intended  to  implement  the  DSB  recommendations.  Thus, 
such comments have not resulted in any changes to this Regulation, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Council Regulation (EC) No 1480/2003 is hereby amended as follows: 

1. 

Article 1(2) shall be replaced by the following: 

‘2.  The  rate  of  the  definitive  countervailing  duty  applicable  to  the  net  free-at-
Community-frontier price, before duty, shall be as follows: 

Korean Producers 

Rate of Duty (%) 

TARIC additional code 

Samsung Electronics Co., Ltd (‘Samsung’) 
24th Fl., Samsung Main Bldg 
250, 2-Ga, Taepyeong-Ro 
Jung-Gu, Seoul 

Hynix Semiconductor Inc. 
891, Daechidong 
Kangnamgu, Seoul 

0% 

A437 

32,9% 

A693 

All other companies 

32,9% 

A999’ 

EN 

39 

   EN 

 
2. 

Article 1(3) shall be replaced by the following: 

‘3.  Upon  presentation  to  the  Member  State’s  customs  authorities  of  the  customs 
declaration for release into free circulation of multi-combinational forms of DRAMs, 
the  declarant  shall  indicate  in  box  44  of  the  Single  Administrative  Document 
(‘SAD’) 
the  below  product/origin 
descriptions indicated in the following table. The rate of the definitive countervailing 
duty applicable to the net-free-at-Community-frontier price, before duty, shall be as 
follows: 

the  reference  number  corresponding 

to 

No 

Product/origin description 

than 

1  Multi-combinational forms of DRAMs originating in 
countries  other 
the  Republic  of  Korea, 
incorporating DRAM chips and/or mounted DRAMs 
originating  in  countries  other  than  the  Republic  of 
Korea  or  originating  in  the  Republic  of  Korea  and 
manufactured by Samsung 

than 

2  Multi-combinational forms of DRAMs originating in 
countries  other 
the  Republic  of  Korea, 
incorporating DRAM chips and/or mounted DRAMs 
originating 
the  Republic  of  Korea  and 
manufactured  by  all  companies  other  than  Samsung 
and  representing  less  than  10%  of  the  net  free-at-
Community-frontier price of the multi-combinational 
form of DRAM 

in 

than 

3  Multi-combinational forms of DRAMs originating in 
countries  other 
the  Republic  of  Korea, 
incorporating DRAM chips and/or mounted DRAMs 
originating 
the  Republic  of  Korea  and 
manufactured  by  all  companies  other  than  Samsung 
and  representing  10%  or  more but  less  than 20% of 
the  net  free-at-Community-frontier  price  of  the 
multi-combinational form of DRAM 

in 

than 

4  Multi-combinational forms of DRAMs originating in 
countries  other 
the  Republic  of  Korea, 
incorporating DRAM chips and/or mounted DRAMs 
originating 
the  Republic  of  Korea  and 
manufactured  by  all  companies  other  than  Samsung 
and  representing  20%  or  more but  less  than 30% of 
the  net  free-at-Community-frontier  price  of  the 
multi-combinational form of DRAM 

in 

than 

5  Multi-combinational forms of DRAMs originating in 
countries  other 
the  Republic  of  Korea, 
incorporating DRAM chips and/or mounted DRAMs 
the  Republic  of  Korea  and 
originating 
manufactured  by  all  companies  other  than  Samsung 
and  representing  30%  or  more but  less  than 40% of 
the  net  free-at-Community-frontier  price  of  the 
multi-combinational form of DRAM 

in 

Reference 
number 

Rate of Duty 
(%) 

D010 

0% 

D011 

0% 

D012 

3,2% 

D013 

6,5% 

D014 

9,8% 

EN 

40 

   EN 

 
No 

Product/origin description 

than 

6  Multi-combinational forms of DRAMs originating in 
countries  other 
the  Republic  of  Korea, 
incorporating DRAM chips and/or mounted DRAMs 
originating 
the  Republic  of  Korea  and 
manufactured  by  all  companies  other  than  Samsung 
and  representing  40%  or  more but  less  than 50% of 
the  net  free-at-Community-frontier  price  of  the 
multi-combinational form of DRAM 

in 

than 

7  Multi-combinational forms of DRAMs originating in 
the  Republic  of  Korea, 
countries  other 
incorporating DRAM chips and/or mounted DRAMs 
originating 
the  Republic  of  Korea  and 
manufactured  by  all  companies  other  than  Samsung 
and  representing  50%  or  more  of  the  net  free-at-
Community-frontier price of the multi-combinational 
form of DRAM 

in 

Reference 
number 

Rate of Duty 
(%) 

D015 

13,1% 

D016 

16,4%’ 

3. 

Article 1(5) shall be replaced by the following: 

‘5. 
In  case  of  no  indication  of  any  reference  number  in  the  SAD,  as  foreseen  in 
paragraph 3, or if the customs declaration is not accompanied by any statement in the 
cases required in paragraph 4, the multi-combinational form of DRAM shall – unless 
the  contrary  is  proved  -  be  considered  as  originating  in  the  Republic  of  Korea  and 
manufactured by all companies other than Samsung, and the countervailing duty rate 
of 32,9% shall apply. 

In  cases  where  some  of  the  DRAM  chips  and/or  mounted  DRAMs  incorporated  in 
multi-combinational  forms  of  DRAMs  are  not  clearly  marked  and 
their 
manufacturers are not clearly identifiable from the statement required in paragraph 4, 
it should be assumed - unless the contrary is proved – that such DRAM chips and/or 
mounted  DRAMs  are  originating  in  the  Republic  of  Korea  and  have  been 
manufactured  by  companies  subject  to  the  countervailing  duty.  In  such  cases,  the 
countervailing duty rate applicable to multi-combinational forms of DRAMs shall be 
calculated on the basis of the percentage represented by the net free-at-Community-
frontier  price  of  the  DRAM  chips  and/or  mounted  DRAMs  originating  in  the 
Republic  of  Korea  out  of  the  net  free-at-Community-frontier  price  of  the  multi-
combinational forms of DRAM, as established in the table contained in paragraph 3, 
numbers  2  to  7.  Should,  however,  the  value  of  the  aforementioned  DRAM  chips 
and/or mounted DRAMs be such to determine that the multi-combinational forms of 
DRAMs 
the 
countervailing  duty  rate  of  32,9%  shall  apply  to  the  multi-combinational  forms  of 
DRAMs.’ 

incorporated  becomes  of  Korean  origin, 

in  which 

they  are 

EN 

41 

   EN 

 
This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

Article 2 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

For the Council 
The President 

EN 

42 

   EN